For foreign investors entering the China market, taxation is a problem that needs attention. The mode of tax payment is closely related to the form of business. The most common commercial forms are representative offices and limited liability companies. According to China's tax law, these foreign enterprises need to pay relevant taxes, mainly corporate income tax and business tax. For industrial and commercial foreign enterprises, value-added tax should also be paid. Below we will mainly introduce the main tax payment types and calculation methods of foreign companies in China.
Tax registration and tax entries
After obtaining the business license, according to the regulations of State Taxation Administration of The People's Republic of China, People's Republic of China (PRC), the representative office or limited liability company must register with the relevant tax authorities within 30 days. Generally, it takes 10 working days to apply for registration. The company does not need to hire an authorized agent to complete this procedure, and can apply on its own. If an investor uses a registered service provider to register a representative office or a limited liability company, the tax application is usually included in the service.
Main taxes payable by foreign companies
1. Enterprise income tax
Enterprise income tax is a kind of income tax levied on the production, operation and other income of limited liability companies at home and abroad.
A tax on income. Limited liability companies are required to pay this tax on a monthly basis, and the applicable tax rate is 25%. The calculation method is as follows:
Taxable amount = [total annual income-expenditure-loss] × applicable tax amount
2. Business tax
Business tax is a tax levied on the income of some service industries. These industries include: communication and transportation (applicable tax rate is 3%), construction (3%), financial insurance (5%), post and telecommunications (3%), culture and sports (3%), entertainment (5-20%), construction sales in China (5%) and other services (5%). Shanghai has added an additional tax on the taxable amount, for example, from 5% to 5.025%. Additional tax is divided by region: urban area,11%; Suburbs, 9%; Suburban counties, 5%. . Limited liability companies are required to pay this tax every month. Note that business tax and value-added tax belong to the same tax category. For example, if a company is a service provider, it has to pay business tax, and if it is a production or commercial company, it has to pay value-added tax. The calculation method is as follows:
Taxable amount = turnover × applicable tax rate
3. Withholding income tax
Non-local enterprises must pay 10% seizure tax. Withholding tax is applicable to the following situations:
-Dividends paid to non-local parent companies
-Interest, rent, franchise fees and management fees paid to non-local foreign enterprises.
-Net capital income from shares and equity conversion of foreign-funded companies
Taxpayers need to withhold the tax payable from the amount paid to non-China companies and hand it over to the tax authorities.
Some countries have signed tax agreements with China, offering preferential treatment and reduced seizure tax rate to China. These countries are: Hong Kong, Singapore, Mauritius, Barbados and Switzerland. If the physical structure is good enough, there are holding companies.
Established in one of the above countries, the tax rate can be slightly changed.
4.stamp duty
Stamp duty is required for contracts and related documents. Different types of contracts are subject to different tax rates. For example, the purchase and sale contract has to pay stamp duty of three ten thousandths of the total income. When the contract is signed, the tax stamp will be attached to the contract.
5. Urban real estate tax
Calculated once a year and paid in two installments, May and 165438+ 10. This tax only applies to self-owned property.
6. Vehicle and vessel use tax
Users of vehicles and vessels are required to pay vehicle and vessel licence tax. The tax on ships and trucks is in tons, while the tax on passenger cars is in models and seats. This tax needs to be paid twice a year, in May and 1 1 respectively.
7. Vehicle purchase fee
According to ≤ China people * * * and China's "Provisional Regulations on Vehicle Purchase Tax" ≥, the scope of vehicle purchase tax collection includes all kinds of cars, motorcycles, trams, trailers and agricultural transport vehicles, and the tax rate is 10%.
Representative office tax
Formula for calculating tax according to expenditure.
(1) Calculation of consolidated industrial and commercial tax
Recurrent expenditure ÷( 1- approved profit rate 15%- consolidated industrial and commercial tax rate 5%)= income × (consolidated industrial and commercial tax rate) 5%= payable consolidated industrial and commercial tax amount.
(2) Calculation of enterprise income tax
Income × (approved profit rate) 15%= taxable income.
Taxable income × foreign enterprise income tax rate = income tax payable
This relatively complicated calculation result is probably 10% operating expenses tax. Can be used as a template. Limited liability companies pay taxes on a monthly basis, and representative offices pay business tax and enterprise income tax on a quarterly basis.
Preferential tax policy
Many foreign companies registered before March 16, 2007, as long as they are located in special economic zones or engaged in production-oriented business, enjoy tax incentives. However, since the implementation of the New Income Tax Law (65438+ 10/2008), the preferential tax treatment no longer takes effect. Moreover, companies that enjoy the reduced tax rate now will gradually find that the income tax rate of the company will increase to the standard 25% in the next five years.
However, for some industries and projects encouraged by the state, some tax incentives will continue to be maintained. Here are some examples:
Industry/project
tax rate
Some high-tech companies
15%
Some small-scale companies with low profits
20%
Income comes from:
-Certain agricultural, forestry, animal husbandry and fishery projects.
-Investment or operation of certain public infrastructure projects.
-Qualified environmental protection and conservation projects
-Specific technology transfer projects
Non-local company
Tax exemption or reduction
Companies located in some ethnic autonomous areas (approved by the relevant local people's governments)
Tax exemption or reduction
Note: Measures for the Administration of Accreditation of High-tech Enterprises.
On April 14, 2008, the Ministry of Science and Technology of the People's Republic of China, the Ministry of Finance and State Taxation Administration of The People's Republic of China jointly issued the Administrative Measures for the Accreditation of High-tech Enterprises. The policy emphasizes that high-tech enterprises should continue to carry out research and development and transformation of technological achievements in high-tech fields supported by the state, form independent intellectual property rights with enterprises as the core, and build independent innovation capabilities. The measures also clearly stipulate the ratio of scientific and technological personnel to R&D personnel, R&D investment intensity, sales ratio of high-tech products (services), R&D management ability, transformation ability of scientific and technological achievements, independent intellectual property rights and enterprise growth. In the future, national high-tech enterprises will be recognized uniformly. Only enterprises that meet the characteristics of high-tech enterprises and meet the requirements of various identification indicators can be recognized as high-tech enterprises and enjoy preferential tax policies according to law.
value-added tax
1. General taxpayers and small-scale taxpayers
China's tax system distinguishes between ordinary and small-scale VAT taxpayers (see the table below). Small-scale taxpayers refer to taxpayers whose annual taxable sales are below the prescribed limit, with 300,000 yuan for production companies and 654.38 yuan+8,000 yuan for taxpayers engaged in wholesale and retail. After the application process is completed, small-scale taxpayers who have not exceeded the limit can apply for the status of VAT general taxpayer. On the contrary, companies that exceed the above limits need to apply for the status of general taxpayers. VAT needs to be paid monthly. Special invoices for value-added tax can be bought from the tax bureau.
2. General taxpayer
The actual value-added tax payable by ordinary taxpayers is the part where the output tax is greater than the input tax. There are two applicable tax rates: basic tax 17% and lower tax rate 13%. The calculation formula is as follows:
Taxable amount = current output-current input
Output tax VAT = sales * applicable tax rate
If the current sales amount is less than the current input amount, the amount that cannot be offset can be reserved for the next tax period.
3. Small scale taxpayers
The calculation method of value-added tax payable by small-scale taxpayers is simple, and the sales amount and tax rate are included in the calculation, and the input value-added tax is not deducted. This shows that the input value-added tax undertaken by small-scale taxpayers (buying goods from ordinary taxpayers) will not be refunded by the tax authorities. In addition, small-scale taxpayers do not have to pay VAT for exporting goods. The applicable tax rate is 4% for commercial companies and 6% for others (such as production companies). The calculation method is as follows:
Taxable amount = sales/1+4% or 6% × tax rate (4% or 6%)
4 consumption tax
Consumption tax is a tax levied on the sales of specific consumer goods. Including 1 1 Category: alcohol, tobacco, cosmetics, jewelry, rare gems, firecrackers, gasoline, diesel oil, automobile tires, motorcycles and small cars. The applicable tax rate ranges from 3% to 50%, and the consumption tax ranks first in the value-added tax. Producers include this tax in the price of products, which means that this tax is ultimately borne by consumers. Retailers and wholesalers do not need to pay consumption tax when trading such goods. Moreover, for export commodities, the consumption tax can be fully refunded.
5. Export VAT
The value of general export commodities can be exempted from value-added tax and consumption tax. If the goods have left China and all payments have been made within three months after the end of the year, the company may apply to the relevant tax authorities for tax refund. The formal declaration form must be attached to the application form. Small-scale companies that pay value-added tax cannot apply for tax refund, and they can be exempted from value-added tax when exporting goods. The calculation method of tax refund is as follows:
Taxable amount = domestic sales * VAT rate-[total purchase investment * VAT rate-non-refundable amount * VAT rate]
VAT without refund = export sales * [VAT rate-tax refund rate]
Note that the tax rebate rate of some commodities is less than the value-added tax rate, which means that the value-added tax levied on export commodities will not be refunded in full. Please see the following example to understand the calculation method of VAT refund. The tax rate of VAT and tax refund is 17%. A negative tax payable means that it will be refunded.
6. Value-added tax on imported goods
Taxes on imported goods are calculated as follows:
Taxable amount = VAT rate * [Taxable goods value+customs duty+consumption tax]
Taxable value of imported goods includes purchase price, transportation fee and insurance premium. Look at the following example: value-added tax 17%, consumption tax 3%, tariff 12%.
Annual audit
Representative offices and limited liability companies shall be audited annually (except representative offices with tax exemption qualifications). The annual audit shall be submitted before the end of March of the following year. Foreign companies in China can only distribute and repatriate profits after completing the annual audit and related income tax liabilities. The annual audit must be conducted by a certified public accountant company (China or a Sino-foreign joint venture company) incorporated in People's Republic of China (PRC) according to the laws and regulations of People's Republic of China (PRC).
The following table summarizes the obligations of representative offices and limited liability companies in terms of payment date and payment term.