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Taxes in China:

A Quick Reference Guide

By: Grace Zhu, Karen Wang

Once you have established your company in China as a Representative Of ce (RO), Wholly Foreign Owned Enterprise (WFOE) or a Joint Venture (JV), it is subject to taxes. The business sector, development zones and geographic regions will have an impact on the regulations that apply.

Overview of Tax Types in China

The table below can serve as a useful reference guide to provide basic information about tax types and to which entities they apply.

Categories Taxpayer Classification Descriptions Rate
Value-Added Tax VAT General Taxpayers Sales of goods and products 16%
Processing, repair or replacement services
Leasing of movable property
Transportation services 11%
R&D and technology-related services 6%
Information technology services
Cultural and creative services
Logistics auxiliary services
Authentication and consulting services
VAT Small-Scale Taxpayers All of the above descriptions 3%
All VAT Taxpayers Exports 0%
Consumption Tax Manufacturing or import of luxury consumer goods 1% – 56%
Corporate Income Tax Resident Entities Profits from all forms of income generated by the resident Chinese entity 25%
Non-Resident Entities Withholding tax on China-sourced income VAT 6%
Corporate Income Tax 3.75% – 12.5%
Individual Income Tax Wages, salaries and other employment-related income 3% – 45%
Income from other sources 20%, 30%, 40%

 

VAT Refund

What is a tax refund in export business? China implemented and export tax refund policy to refund the indirect taxes paid by export enterprises in the production and distribution process to enhance China's competitiveness in foreign markets and promote China's export. 0% VAT applies to the exports; thus the VAT exemption and refund policy applies to all VAT taxpayers. The rate of VAT refund varies, subject to different industries.

  • Basic concepts in tax refund
    • Export sales: The output VAT exempted vs. Domestic sales: 17% of output VAT is charged by tax authority
    • Export sales: The paid input VAT is refunded to the company at a certain tax refund rate vs. Domestic sales, the paid input VAT can be deductible from total VAT payable
  • Conditions to be met for tax refund
    • The goods exported are in the scope of VAT-taxable items
    • The goods are sold abroad and customs clearance completed
    • The company shall export in its own name, instead of in the other party's name
    • The export is deemed as sales in accounting (instead of donation, samples, etc.)
  • Procedures in tax refund claim
    • Tax refund qualification application from tax bureau
    • Goods are exported and the customs are declared
    • The related data and documents are collected
    • Determine tax refund rate according to the custom HS code of the goods exported
    • Preliminary tax refund claim online
    • Final tax refund claim online
    • Submit the hard copies of documents to local tax bureau for review
  • Exporters who use RMD to settle their cross-border trade transactions are entitled to VAT refunds or exemption according to the rules issued by The State Administration of Taxation on August 25, 2009.

ABOUT VISTRA

Ranked among the top three corporate service providers globally, Vistra Group provides a broad range of services and solutions from International Incorporations to Trust, Fiduciary and Fund Administration Services.

Vistra employs more than 3,500 professionals across 75 locations in 48 jurisdictions. In China, we help foreign companies with market entry including setting up Offshore Company Structures, Incorporation in China, Virtual CFO and HR Solutions.

Grace Zhu

Chief Representative

PNC Bank N.A., Shanghai Representative Office

Grace Zhu is responsible for PNC’s business in mainland China and Hong Kong.

She has more than 25 years’ experience in the banking industry in Shanghai, including check clearing, payments, cash management, trade finance and loans business. Prior to joining PNC Bank, Zhu served other major U.S. and international banks. 

Zhu holds a bachelor’s degree in finance and taxation from Shanghai University of Finance & Economics and a master’s degree in business administration from the joint program of Shanghai University of Finance & Economics and Webster University.

Karen Wang

Associate Director

International Expansion,  Vistra China

Karen Wang has been helping overseas companies enter China for more than 10 years. She gained her experience from multinational organizations and international consultancy firms, where she advised overseas clients in a variety of industries, including manufacturing, consumer goods, trading and consulting, including both multinationals and startups.

Wang co-chairs the American Chamber of Commerce Future Leader Committee and is a frequent speaker on China-related topics.

Ready To Help:

Established in 2008, PNC's Shanghai Representative Office (SRO) is available as a resource to PNC clients who are doing business with China or in China. The SRO can provide assistance and guidance on:

  • Corporate Establishment
  • Obtaining Local Banking Services
  • Market Information
  • Introductions to Local Resources

Should you have any questions, please contact theInternational Advisory Team; Grace Zhu, Chief Representative or Chris Chen, Representative, in the PNC Shanghai Representative Office.

Important Legal Disclosures & Information

This document and the Information it contains is intended for informational purposes only, and should not be construed as legal, accounting, tax, trading or other professional advice. You should consult with your own independent advisors before taking any action based on the Information. Under no circumstances should the Information be considered trading advice or a recommendation or solicitation to buy or sell any products or services or a commitment to enter into any transaction. The Information is gathered from sources PNC Bank believes to be reliable and accurate at the time of publication and are subject to change without notice. PNC Bank makes no representations or warranties regarding the Information’s accuracy, timeliness, or completeness. All performance, returns, prices or rates are for illustrative purposes only. Markets do and will change. Actual results will vary, and may be adversely affected by exchange rates, interest rates, or other factors.

PNC is a registered service mark of The PNC Financial Services Group, Inc. (“PNC”). 

PNC Bank’s Shanghai Representative Office was approved by the China Banking Regulatory Commission on April 16, 2008. PNC’s Shanghai office is prohibited from engaging in any form of operational business activities in compliance with the People’s Republic of China on Administration of Foreign-funded Banks released by the State Council. Accordingly, PNC’s Shanghai Representative Office does not accept deposits, underwrite loans or issue credit of any kind, or sell wealth management products in China. Any activities of these types in China using the PNC name or trademarks are not authorized by PNC.

Bank deposit and treasury management products and services are provided by PNC Bank, National Association (“PNC Bank”), a wholly-owned subsidiary of PNC and Member FDIC.

The PNC Financial Services Group, Inc. All rights reserved.