Last news：Shanghai Company Tax Guideline ，Guidance for Doing Business in China- Tax Part Regarding enquiries of clients, ELITE STAGE summarized information about tax for doing business in China, to better understand the general principle of tax policies in China and the basis for calculating taxation. 1.1 Background There are numerous ways to invest in the Chinese market. A common way is to form a foreign-invested enterprise （FIE）。 Nowadays the most popular option is to establish a Wholly Foreign-Owned Enterprise （WFOE）。 Over 80% of investors choose this investment vehicle when entering the Chinese market. However, there are also a variety of other options. 1.2 Joint Ventures For a long time a joint venture between a Chinese company and a foreign company was the only way for foreign investors to enter the Chinese market, especially before China became a member of the WTO in 2001. Therefore relevant legislation already exist for a long time and is very extensive and comprehensive. For a successful Joint Venture both partners need to have the same goals. Joint ventures have advantages and disadvantages. A Chinese partner is likely to be familiar with the local market, and might have a well established network with Chinese businesses and authorities. One of the biggest challenges is to find the right partner and to negotiate a fair agreement. In some industries, for example in the automobile and energy industry, it is mandatory to set up a joint venture when entering the Chinese market. There are two types of joint ventures: Equity Joint Ventures and Cooperative Joint Ventures: 1.3 Wholly Foreign-Owned Enterprise A Wholly Foreign Owned Enterprise （WFOE） is a limited liability company. As explained before, a vast majority of of all foreign investments in China are done through a WFOE. A wholly foreign owned enterprise is, as the name implies, 100% owned by one or more foreign investors and established entirely with foreign capital. This gives the company a higher level of independence, control and security over its business activities. In certain industries （e.g. high and new technology and equipment, development of new products as well as energy preservation） the government encourages foreign investors to set up a WFOE. However, in certain other industries investors might be restricted or prohibited to set up a WFOE. Other useful facts about WFOEs are: ※100% Control ※Cost and time saving due to not having a negotiation process with a Chinese partner ※Intellectual Property Rights（IPR）， trade secrets, technologies can be secured ※More flexile and streamlined management systems ※Enterprise income tax law applicable 1.4 Tax Law Types Generally the following need to be considered when dealing with tax issues: VAT: Value Added Tax BT: Business Tax CT: Consumption Tax EIT: Enterprise Income Tax IIT: Individual Income Tax 1.5 Overview Tax Rates 1 Types of TAX Payers There are two types of tax payer for trading company, a general tax payer and a small-scale tax payer. For general taxpayers, the VAT is levied at 17% on the turnover of the sales of goods and the provision of processing and maintenance services. For small-scale taxpayers, with effect from 1 January 2009, VAT is levied at 3% on turnover derived. With effect from 1 January 2009, the threshold for a general VAT payer is reduced from RMB1 million to RMB0.5 million for manufacturing taxpayers, and from RMB1.8 million to RMB0.8 million for commercial taxpayers. 1. Tax rates There are two types of tax payers for VAT purpose: general taxpayers and small-scale taxpayers. VAT tax rates vary according to the taxable activities / classification. We would like to highlight the tax rates in the below table: 1.6 Tax Catalogue Taxes on turnover: Value added tax （VAT） Consumption tax （CT） Taxes on income: Business tax （BT） Customs duty on exports/ imports Enterprise income tax （EIT） - adapted for FIE, FE Individual income tax （IIT） - adapted for foreign individuals Taxes on property and transactions: Urban real estate tax Stamp tax Contractual tax （deed tax） Taxes / Dues on natural resources: Resource tax Land usage due 1.7 Tax registration and Financial Year Calendar Tax registration procedures: A company must register with local and national tax bureaus within 30 days after establishment to have its status recognized. Once the tax status is approved ,general VAT tax payers must register for VAT purposes with the tax bureaus. Companies not resident in China are not required to register for VAT Note: a representative office shall apply for the tax-levying method Periodic tax declaration procedures: ※Monthly: VAT, Business Tax, Individual Tax, etc.; Usually before 15th of next month ※Quarterly: pre-application of EIT; Usually before 15th of next month ※Other taxes （e.g., land appreciation taxes, etc.） are due in the second month after a transaction Annual tax declaration /Annual Licenses audit: Preparation of relevant tax returns for Enterprise Income Taxes （“EIT”） compliance to be filed within the first 5 months of the coming year. EIT tax declaration: Usually in each April with audited financial report; Late payment surcharge on delaying declaration: 0.05% per day. Relevant tax authority: State Administration of Taxation （SAT） Annual Licenses audit: Usually in each May 1st ----30, June Preparation of the relevant documents / forms within 6 months of the following year . Relevant authorities: Ministry of Commerce （MOFCOM） Financial Bureau State Administration of Foreign Exchange （SAFE） Shanghai Company Tax Guideline Guidance for Doing Business in China- Tax Part Regarding enquiries of clients, ELITE STAGE summarized information about tax for doing business in China, to better understand the general principle of tax policies in China and the basis for calculating taxation. 1.1 Background There are numerous ways to invest in the Chinese market. A common way is to form a foreign-invested enterprise （FIE）。 Nowadays the most popular option is to establish a Wholly Foreign-Owned Enterprise （WFOE）。 Over 80% of investors choose this investment vehicle when entering the Chinese market. However, there are also a variety of other options. 1.2 Joint Ventures For a long time a joint venture between a Chinese company and a foreign company was the only way for foreign investors to enter the Chinese market, especially before China became a member of the WTO in 2001. Therefore relevant legislation already exist for a long time and is very extensive and comprehensive. For a successful Joint Venture both partners need to have the same goals. Joint ventures have advantages and disadvantages. A Chinese partner is likely to be familiar with the local market, and might have a well established network with Chinese businesses and authorities. One of the biggest challenges is to find the right partner and to negotiate a fair agreement. In some industries, for example in the automobile and energy industry, it is mandatory to set up a joint venture when entering the Chinese market. There are two types of joint ventures: Equity Joint Ventures and Cooperative Joint Ventures: 1.3 Wholly Foreign-Owned Enterprise A Wholly Foreign Owned Enterprise （WFOE） is a limited liability company. As explained before, a vast majority of of all foreign investments in China are done through a WFOE. A wholly foreign owned enterprise is, as the name implies, 100% owned by one or more foreign investors and established entirely with foreign capital. This gives the company a higher level of independence, control and security over its business activities. In certain industries （e.g. high and new technology and equipment, development of new products as well as energy preservation） the government encourages foreign investors to set up a WFOE. However, in certain other industries investors might be restricted or prohibited to set up a WFOE. Other useful facts about WFOEs are: ※100% Control ※Cost and time saving due to not having a negotiation process with a Chinese partner ※Intellectual Property Rights（IPR）， trade secrets, technologies can be secured ※More flexile and streamlined management systems ※Enterprise income tax law applicable 1.4 Tax Law Types Generally the following need to be considered when dealing with tax issues: VAT: Value Added Tax BT: Business Tax CT: Consumption Tax EIT: Enterprise Income Tax IIT: Individual Income Tax 1.5 Overview Tax Rates 1 Types of TAX Payers There are two types of tax payer for trading company, a general tax payer and a small-scale tax payer. For general taxpayers, the VAT is levied at 17% on the turnover of the sales of goods and the provision of processing and maintenance services. For small-scale taxpayers, with effect from 1 January 2009, VAT is levied at 3% on turnover derived. With effect from 1 January 2009, the threshold for a general VAT payer is reduced from RMB1 million to RMB0.5 million for manufacturing taxpayers, and from RMB1.8 million to RMB0.8 million for commercial taxpayers. 1. Tax rates There are two types of tax payers for VAT purpose: general taxpayers and small-scale taxpayers. VAT tax rates vary according to the taxable activities / classification. We would like to highlight the tax rates in the below table: 1.6 Tax Catalogue Taxes on turnover: Value added tax （VAT） Consumption tax （CT） Taxes on income: Business tax （BT） Customs duty on exports/ imports Enterprise income tax （EIT） - adapted for FIE, FE Individual income tax （IIT） - adapted for foreign individuals Taxes on property and transactions: Urban real estate tax Stamp tax Contractual tax （deed tax） Taxes / Dues on natural resources: Resource tax Land usage due 1.7 Tax registration and Financial Year Calendar Tax registration procedures: A company must register with local and national tax bureaus within 30 days after establishment to have its status recognized. Once the tax status is approved ,general VAT tax payers must register for VAT purposes with the tax bureaus. Companies not resident in China are not required to register for VAT Note: a representative office shall apply for the tax-levying method Periodic tax declaration procedures: ※Monthly: VAT, Business Tax, Individual Tax, etc.; Usually before 15th of next month ※Quarterly: pre-application of EIT; Usually before 15th of next month ※Other taxes （e.g., land appreciation taxes, etc.） are due in the second month after a transaction Annual tax declaration /Annual Licenses audit: Preparation of relevant tax returns for Enterprise Income Taxes （“EIT”） compliance to be filed within the first 5 months of the coming year. EIT tax declaration: Usually in each April with audited financial report; Late payment surcharge on delaying declaration: 0.05% per day. Relevant tax authority: State Administration of Taxation （SAT） Annual Licenses audit: Usually in each May 1st ----30, June Preparation of the relevant documents / forms within 6 months of the following year . Relevant authorities: Ministry of Commerce （MOFCOM） Financial Bureau State Administration of Foreign Exchange （SAFE） Financial Bureau Statistics Bureau 1.8 Earlier stage: Taxation Initial Application: （within 30 days after establishment begin to apply） --Tax type setting and verification; --Tax agent training, declaration system purchasing, three parties tax deduction agreement with bank; --Legal representative or person in charge meets with tax officer; --General tax payer qualification application and verification; --Tax control system purchasing, training if necessary; --Blank invoices purchasing. View More ChinaTax Guideline Article Financial Bureau Statistics Bureau 1.8 Earlier stage: Taxation Initial Application: （within 30 days after establishment begin to apply） --Tax type setting and verification; --Tax agent training, declaration system purchasing, three parties tax deduction agreement with bank; --Legal representative or person in charge meets with tax officer; --General tax payer qualification application and verification; --Tax control system purchasing, training if necessary; --Blank invoices purchasing. View More ChinaTax Guideline Article
Posted on: Fri, 01 Aug 2014 02:33:52 +0000
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