China’s Tax System for the Foreign Nationals & Firms

The process of taxation for the overseas firms in China is quite straightforward especially if they have experienced China lawyers to assist them. Over the last five to ten years, China opened its door for the foreign investments and this reform has gone to such an extent that now foreign companies can enjoy huge tax incentives for the projects initiated in China. The only thing they need to do is to properly comply with the regulations for taxation.

As a foreign national, you are required to register with the State Administration of Taxation (SAT) as soon as you are eligible for taxation in China. According to the Greenback Expat Tax Services, income from employment is taxed monthly at a progressive tax rate that caps at 45%.

China Tax Rates 2018

>> The tax on an individual’s income is progressive. As at 2017, an individual’s income is taxed progressively at 3% – 45%.

>> The 2018 corporate tax rate for domestic and foreign companies is 25%.

>> Small companies pay 20% corporate tax in certain cases.

>> Companies pay 10% corporate tax in certain regions.

>> Hi-tech companies pay 15% corporate tax.

The tax rates from China’s State Administration of Taxation (SAT) for 2018 are as follows:

Earnings in RMBRate Applicable to Income Level (%)
0 – 1,500 3%
1,501 – 4,500 10%
4,501 – 9,000 20%
9,001 – 35,000 25%
35,001 – 55,000 30%
55,001 – 80,000 35%
80,001 and above 45%

Note that there is a monthly standard deduction for foreign nationals of RMB 4,800.

What is the tax year-end?

31 December.

Income Tax Benefits Foreign Companies can Enjoy in China

>> All enterprises (except sole proprietorships and partnerships), including all organizations that generate income in China, are subject to CIT.

>> CIT payable is calculated using the below formula:

>> CIT payable = CIT taxable income x CIT rate Tax exemptions or reductions based on tax incentives

According to the China lawyers, the corporate income tax (“CIT”) – standard tax rate is 25%, but the tax rate could be reduced to 15% for qualified enterprises which are engaged in industries encouraged by the China government (e.g. New/high Tech Enterprises and certain integrated circuits production enterprises). Tax holiday is also offered to enterprises engaged in encouraged industries. Other CIT incentives are also available for tax resident enterprises in China.

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