The criteria for this is based on annual taxable sales amounts, but there are often cases where a small-scale company may be better of registering as a general payer. Note that for some companies it is beneficial to register for general status even with low income. Depending on the company finances, the ability to offset input VAT can be important, and to do business with some Chinese suppliers and clients it may be necessary to be able to issue VAT Fapiao.
There has been a significant change in the VAT system in China in recent years. In the past, there were a number of different rates applied for different areas, alongside a separate Business Tax applied for some areas of service income. These have gradually been simplified and merged, resulting in a new VAT system applied nationwide from July that has three different levels of VAT — 6, 11 and 17 percent.
Urban Real Estate Tax Reforms in China
These rates were altered again in May as part of ongoing efforts by the Chinese government to lessen overall tax burdens for companies. The following is a summary of the VAT rates applied. For a full listing consult a China accountant, or obtain the government provided listings.
Consumption tax is another sales based tax, this time applied to manufactured or imported consumables and luxury goods. It is based on the sale value of the item. Tax should be calculated and paid monthly. The highest rates are applied to tobacco and alcohol.
Business Tax was applicable for many years for various areas of service income including financial, construction, leisure and entertainment as well as various property and land use rights transactions. Following major VAT reform up to , the areas where business tax was applied have now mostly been incorporated into the VAT system.
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Stamp Tax or Stamp Duty is a tax levied on various contracts, licenses and accounting books. This includes purchases and sales contracts, transfer of property rights, property leasing, engineering and design contracts, technology contracts, storage, and financial loans. Owners or users of property for commercial purposes must pay Real Estate Tax. Residential property is not included for individual use, but tax does apply for the leasing of residential property. Real Estate Tax is charged at a rate of 1.
Guide to China Tax Compliance for Foreign Companies | FDI China
This tax applies to all transfers of land use rights for state-owned land or buildings. Any income earned from the transfer is taxed on a sliding scale depending on the total appreciation. Costs incurred in the transfer, and also in development of the land during ownership, can be deducted. The taxation system in China has undergone many changes since the s and will most likely continue to do so. The Chinese government remains supportive of improving the business environment in China, for both domestic and foreign companies.
Li said the NPC will ensure that all the legislative plans are completed on schedule, without giving a detailed timetable. Multiple experts told Caixin that property tax legislation would be complicated and time-consuming. Then it would need to go through three rounds of deliberation before a final vote.
The government has made some preparations for introducing a property tax. In February, the State Administration of Taxation issued a policy to improve the registration and sharing of information regarding property transactions, which was seen as a preparation for a new tax on property ownership.
China launched pilot property tax programs in Shanghai and Chongqing in by taxing only higher-priced homes and people with multiple homes. Since , for owner-occupied properties in Shanghai, the real estate tax rate is from 0. Companies or individuals that occupy land within cities, counties, townships and mining areas are subject to an annual Urban and Township Land Use Tax calculated against the square metre size of the property.
The rate of the tax is set at a local level and can vary from about RMB0. Income is predominantly from rentals.
Real Estate Information, Tax Maps, Tax Cards and Tax Bills
Profits from developing or trading land can also be taxed as income as opposed to capital gains. Foreign enterprises not maintaining establishments in China are taxable on their income and gain on a gross withholding basis. This may be reduced where the offshore country has a tax treaty with the PRC. The fees of agents, and legal and other professional advisors are payable in connection with the ongoing management of the property.
The fees of auditors, and legal and other professional advisors are payable in connection with the transfer of income. Individual sellers may be exempted from paying income tax, VAT, stamp duty and LVAT provided that required conditions have been satisfied. When an agent is involved in the sale and purchase of property, an agent's fee is payable on the signing of the contract regardless of whether the sale and purchase proceeds to the final stage.
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The agent's fee rate ranges from 0. What taxes are payable in relation to the purchase of real estate via the various types of corporate vehicle available and who is responsible for the payment of these taxes?