Corporate Income Tax in China
The fundamental regulations on China’s corporate income tax (CIT) are the CIT Law and its Implementation Guidelines. Both regulations were most recently updated in 2007 and entered into force on January 1, 2008.
All enterprises (except sole proprietorships and partnerships), including all organizations that generate income in China, are subject to CIT. The CIT Law categorizes enterprises into resident enterprises and non-resident enterprises, which are subject to different tax obligations.
Calculating CIT payable
CIT payable is calculated using the below formula:
CIT payable = CIT taxable income x CIT rate – Tax exemptions or reductions based on tax incentives
A 25 percent standard CIT rate is applied to resident enterprises and non-resident enterprises with income-generating establishments in China. A 10 percent withholding rate (temporarily reduced from 20 percent) is applied to China-sourced income not related to a non-resident enterprise’s establishments in China, or China income derived by non-resident enterprises without establishments in China. Small and low-profit enterprises are entitled to a reduced CIT rate of 20 percent, and if a taxpayer qualifies as a high-tech enterprise, a reduced CIT rate of 15 percent applies.
This article is adapted from “Tax, Accounting and Audit in China 2017.” The guide offers a comprehensive overview of the major taxes that foreign investors are likely to encounter when establishing or operating a business in China, as well as other tax-relevant obligations. This concise, detailed, and pragmatic guide is ideal for business leaders who must navigate the complex tax and accounting landscape in China in order to effectively manage and strategically plan their China operations.
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