Corporate Tax in China WFOEs

Our previous guidance of China WFOE registration, has listed a taxation form for the WFOEs which from different industries and business activities. Now, SMEsChina lists a new topic about the Corporate tax in China WFOEs including VAT (income), and profit tax (corporate income tax), preferential tax rates, and deduction for foreign owned enterprises.

Today, our chief CPA and executive finance manager, Mr Zheng will explain the detail taxes and computational formulas for Chinese taxation implemented since the reforming of current taxation, Mr Zheng works at SMEsChina financial support center, he has helped over 3,000 companies to establish compliance financial regulations and provide relevant tax policies training. Here, he will introduce 2 common types of taxpayer (small scale taxpayer and general taxpayer) and share their difference and tax regulations.

OK, Let’s get started.

Taxation of Small Scale Taxpayer

Key Elements of Small Scale Taxpayer

1. Can apply for the general invoices issued by local tax authority.
2. Applicable industries: all industries and business activities, such as: service industry, trade, installation, engineering.
3. Restriction, The annual turnover must not exceed 5 million RMB.
4. Purchase invoices can not deduct the sale VAT.

Basic Taxes of Small Scale Taxpayer:Service Activities:Trade Activities:Engineering and Installation:
VAT – Value Added Tax3%

Tax-free application with a monthly turnover of less than 100,000 RMB

3%

Tax-free application with a monthly turnover of less than 100,000 RMB

3%

Tax-free application with a monthly turnover of less than 100,000 RMB

Corporate Income Tax – Profit Tax

( less than 1 million RMB each year )

5% ( preferential tax rate )5% ( preferential tax rate )5% ( preferential tax rate )
Corporate Income Tax – Profit Tax

( 1 – 3 million RMB each year )

10% ( preferential tax rate )10% ( preferential tax rate )10% ( preferential tax rate )
Corporate Income Tax – Profit Tax

( more than 3 million RMB each year )

25%25%25%

Taxation of General Taxpayer

Key Elements of General Taxpayer

1. Can apply for the special VAT invoices ( fapiao ) issued by local tax authority.
2. Applicable industries: all industries and business activities, such as: service industry, trade, installation, engineering.
3. Restriction of turnover, none.
4. Purchase invoices can deduct the sale VAT, such as: local purchase and oversea import.

Basic Taxes:Service Activities:Trade Activities:Engineering and Installation:
VAT – Value Added Tax6%13%9%
Corporate Income Tax – Profit Tax

( less than 1 million RMB each year )

5% ( preferential tax rate )5% ( preferential tax rate )5% ( preferential tax rate )
Corporate Income Tax – Profit Tax

( 1 – 3 million RMB each year )

10% ( preferential tax rate )10% ( preferential tax rate )10% ( preferential tax rate )
Corporate Income Tax – Profit Tax

( more than 3 million RMB each year )

25%25%25%

What Expense/Cost Invoice Can Offset Profits

Expense/cost invoice ( fapiao can offset profit, fapiao title must be under corporate name and tax id ):

1. Traffic fapiao ( traveling, catering, hotel, tickets ), etc.

2. Purchasing / transport / fapiao from suppliers.

3. Running cost ( warehouse, rent, advertising, conference, exhibition, marketing, office equipment, communication fee ), etc.

4. Management cost ( welfare, salaries, social insurance, house funding, other benefits ), etc.

zheng executive finance manager

Author: Mr Zheng

Executive Finance Manager

Born in Ningbo, Zhejiang, majored in Corporate Finance and Tax Risk at Shanghai Jiaotong University, assists corporations of our customer operating their daily accounting operations and provide tax compliance services.

Responsibilities:

  • Financial Advice

  • Tax Policy Consultation

  • Tax Risk Management

  • Application of Preferential Policy

Ready to Start and Launch a Business in China? So Are We.

SMEsChina teams focus on the growth of enterprise and providing a variety of business solutions in the area of strategy consultancy, WFOE setting up services, business registration, company formation, incorporation of domestic invested enterprise, finance and audit services, HR and payroll, corporate bank account, resident permit, immigration and visa, trademarks and legal compliance.

China is attracting more and more foreign companies, SMEs,entrepreneurs, startups, brands to invest and establish their business entities through reforming various laws and regulations actively. More than 47 million companies and small medium enterprises have registered their business entities in mainland China and over 3.5 million new enterprises are incorporated during each financial year with comfortable process of registering companies. Here SMEsChina is sharing our knowledge and business insights to global enterprises and companies for better learning the regulations and rules of China corporations running and corporate maintaining. All reference and guidance collected by SMEsChina Teams in accordance with the latest implemented laws of the People’s Republic of China on Wholly Foreign-Owned Enterprises ( WFOE ), Joint Venture ( JV ) and Limited Liability Company ( LLC ), Limited Liability Partnership ( LLP ), and other relevant and officially promulgated regulations and rules on the corporation formation and registration of industrial and commercial enterprises and related IP laws, immigration and resident policies ( VISA ), tax laws.

SMEsChina teams happy to work around you and look after your daily China operations confidently and smoothly. Check if setting up a private company is right for you, if you have everything to set up a business in Mainland China, you can get in touch with our teams to get more useful information and online guidance.

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2019-11-13T03:49:37+00:00Categories: Tax and Accounting|Tags: |
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