China Company Accounting and Taxation Service
Hotline: 86-755-82148419 Email: susiehu@citilinkia.com
On 25th February,2020, the Premier of the State Council Li keqiang held the State Council executive meeting in Beijing. Government will increase support for individual businesses to help ease the impact of the epidemic.
The meeting decided: from 1st March to the end of May, 2020, the value-added tax (VAT) of small-scale taxpayers in Hubei province will be exempted, and the levy rate in other regions will be reduced from 3% to 1%.
The meeting pointed out that supporting the rescue of more than 80 million individual businesses that employ more than 200 million people will help stabilize the livelihood of hundreds of millions of families.
In order to support the efforts of individual businesses to prevent and control the epidemic and speed up the resumption of business, the meeting determined that：
1- From 1st March to the end of May, 2020, the value-added tax (VAT) of small-scale taxpayers in Hubei province will be exempted, and the levy rate in other regions will be reduced from 3% to 1%.
2- Individual industrial and commercial households that participate in enterprise employee pension insurance, unemployment insurance and industrial injury insurance by units shall enjoy relief policies with reference to small, medium and micro enterprises.
3- Government will guide financial institutions to increase the issuance of low-interest loans and provide targeted support to individual businesses.
4- Government will effectively implement the policy of lowering the price of electricity for industry and commerce by 5% in a phased manner, with the exception of energy-intensive industries.
5- Government will also encourage local governments to reduce the tax on the use of land in cities and towns, and support the leaser to reduce or reduce the rent for individual businesses.
How many types of tax to pay when open a company in China?
There are about 4 types of taxes for enterprises in the current system:
- Value-added tax (VAT)
- Value-added tax surcharge .
- Enterprise income tax.
- Individual income tax.
Value-added tax (VAT)
Most countries charge Value Added Tax on products and services sold, imported, etc, However China ,different from progressive and modern country, has a different rates of VAT tax on different companies, the differences are as follow:
1- General VAT payers who conduct VAT taxable sales or import goods, the general tax rate is 13% and 6%
2- Small-scale VAT taxpayers is 3%.
Value-added tax surcharge
3- Value-added tax surcharge usually includes urban construction tax, education fee surcharge, local education fee surcharge, etc.
Company income tax
Enterprise income tax is a kind of income tax levied on the production and operation income and other income of enterprises and other organizations that obtain income in China.
Enterprise income tax has different rates to different enterprises.
- Basic rate: 25%. This rate is according to the Article 4 of Enterprise income tax law of the People's Republic of China.
- Benefit rate: 20%.
From 1st January, 2019 to 31st December, 2021， for small businesses with low profits:
If the profit is less than 1 million RMB, there will be a 20% reduction of the 25% tax rate, which means the tax rate is only 5%.
If the profit is from 1 million RMB to 3 million RMB, there will be a 20% reduction of the 50% tax rate, which means the tax rate is only 10%.
Small businesses with low profits refers to:
Enterprises are engaged in industries that not restricted or prohibited by the country and meet the following three conditions
1- The company's annual taxable profit shall not be over 3 million RMB.
2- The company has no more than 300 employees.
3- The total assets of the company is less than 50 million RMB, regardless of the collection method by audit or by verification.
Reference:
Article28, Enterprise Income Tax Law of the People's Republic of China.
Article1&2, Notice of the State Administration of Taxation Concerning the Implementation of the Preferential Income Tax Reduction Policy for Small and Low-profit Enterprises.
Individual income tax
Individual income tax is a kind of income tax levied by the country on the income of its own citizens, individuals residing within the territory of its own country and individuals abroad from its own country.
Taxpayers of individual income tax include both resident taxpayers and non-resident taxpayers, they have different tax rates.
Resident taxpayers, who are obliged to pay tax in full, must pay individual income tax on all their income derived from sources inside or outside China. It is calculated on the basis of monthly pre-payment and annual accumulation.
Non-resident taxpayers only pay individual income tax on their income derived from within the territory of China. It is calculated and paid on a monthly basis.
Foreigners who stay in China more than 183 days in a year will be consider as a Resident taxpayers.
Contact Us
For further inquiries about investment in China, please do not hesitate to contact us at anytime anywhere by simply calling China hotline at 86-755-82148419, or emailing to susiehu@citilinkia.com.You are also welcome to visit our office situated in 16/F, Taiyangdao Bldg 2020, Dongmen Rd South, Luohu, Shenzhen, China.