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.
|Value-Added Tax||VAT General Taxpayers||Sales of goods and products||16%|
|Processing, repair or replacement services|
|Leasing of movable property|
|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%|
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.
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.
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 the International Advisory Team; Grace Zhu, Chief Representative in the PNC Shanghai Representative Office.