Common Issues in Tax Registration of Chinese Companies
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Q.
What’s the tax system in China?
A.The State Taxation Administration (STA) is responsible for formulating and implementing the taxation system in the People's Republic of China. However, the handling and collecting of taxes are carried out locally by regional tax bureaus.
Taxes vary in certain locations and apply to specific industries, such as Free Trade Zones (FTZs). For example, the Shanghai FTZ focuses on international trade and finance with a 9% and 15% tax rate. The Tianjin FTZ focuses on research and development, design and aviation logistics. This area also has a rate between 9% and 15%.
If you run a wholly foreign-owned enterprise (WFOE), which means you're running a business in the country without a local partner, here are the taxes that would apply:
1. Taxes related to income and profit:
● The CIT - the tax on your business' income.
● Withholding Tax - taxes that apply to the profits of foreign-owned businesses operating in China.
2. Taxes related to sales and turnover:
● Value-added tax - A consumption-based tax.
● Consumption tax - Tax that applies to your purchases.
● Stamp tax - A tax on certifying legal documents.
● Real estate tax - A tax that applies on the property your business owns - also known as the property tax.
● Business tax - A tax that applies to service provisions, the transfer of intangible assets and real estate sales.
The Chinese tax system provides advantages for foreign businesses, including deductions for expenses like R&D, training, and donations, tax incentives like reduced rates and exemptions, extensive double taxation avoidance agreements with over 100 countries, and a transparent tax structure. These benefits can bolster cost savings and foreign enterprises' competitiveness in the Chinese market.
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What is corporate income tax (CIT) in China?
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How much is the corporate tax rate in China?
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Is the corporate tax rate applied to all companies?
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Who pays CIT in China?
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What is corporate income tax rates?
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How to calculating CIT payable?
Financing a China Company
Please feel free to contact us for tailored service.
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Q.
How to fund a China company?
A.The process of funding a China company is a unique, and there are only three legal ways to get cash into a Chinese company. Legal filings and regulatory approvals must be obtained in the process. These three legal methods are:
1. Registered Capital
2. Allowable Debt
3. Funds Internally Generated from Business Operations
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Q.
What is the nature of the registered capital?
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Q.
What kind of property could be used as the registered capital?
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Q.
Could the registered capital be changed during operations due to specific business conditions or circumstances?
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Q.
What are the national restrictions on the allowable debt?
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Q.
Why does the company want local debt?
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How to get a loan in China?
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Q.
What could be used as the collateral for acquiring the local debt?