Corporate Income Tax
Since 1 January 2008, The People’s Republic of China will actualise the New Corporation Income Tax system, which unites the domestically-funded enterprises and enterprises with foreign investment Tax System. Then, the tax scope, rate and preference were unified for domestically funded and foreign investment. There are also some special rules about the business between corporations; accordingly the business between corporations would be more equity and clarity.
Object of Taxation
- The corporations within China and the profit organisations are the taxpayer of corporation income tax.
- Corporations were distinguished Resident Corporation from Non-resident Corporation.
- Resident Corporation is the corporation which enrolled in People’s Republic of China and enrolled in other country but the management organisation is in China.
- Non-resident Corporation is the corporation which enrolled in other country and the management organisation is not in China, but has establishments or places within China. Or else, it doesn’t have establishments or places in China but there are some profits derived from sources within China.
Scope of Charge
- Resident Corporation should be taxed on their profits derived from sources within or out of China.
- Non-Resident Corporation which has establishments or places in China should be taxed the Corporation Income Tax on their profits derived from the establishments or places in China, and the profits doesn’t derived from China but have relationship with the establishments or places in China should also be taxed. The corporations which doesn’t have establishments or places in China and have establishments or places in China but their profits doesn’t have relationship with the establishments or places should be taxed the Corporation Income Tax on their profits derived from sources within China.
Tax Rate of Corporation Income Tax
| Type of Corporation | Tax Rate |
|---|---|
| Ordinary Corporation | 25% |
| Especial Support High-Technology Advanced Corporation | 15% |
| Mini-type Small Profit Corporation: A: Manufacturing,Annual Taxable Profits≤RMB300,000, Staff No.≤100, Asset Amount≤RMB30,000,000 B: Non-manufacturing, Annual Taxable Profits ≤RMB300,000, Staff No.≤80, Asset Amount ≤RMB10,000,000 The corporations which doesn’t have establishments or places in China and have establishments or places in China but their profits doesn’t have relationship with the establishments or places. |
20% |
Taxable Profits
Corporation annual taxable year’s total profits, deduction of non-tax profit, exempt-tax profit, costs, expense, taxes and the last taxable year’s losses.
Income Tax Payable
Income Tax Payable = Taxable Profit × Tax Rate
Especially Tax Regulate
- Tax department is entitled to regular according reasonable method if the business between corporation and affiliated part doesn’t accord with Independent Business Principle; reduce corporation or their affiliated part’s tax profit or income.
- ·Corporation could request tax department to put forward the business price tenet and account method between corporation and their affiliated part; tax department would discuss that with corporation and preengage the price after corporation affirmance.
Tax Preferences
- The especial support and encourage development industry or project shall be levied at the corporate profits tax rate of 15%
- The Resident Corporation doesn’t need to levy the corporation profit tax for the bonus stock profit by invest at other resident corporation.
- National debt accrual doesn’t need to levy the corporation profit tax.
- The profit of invest in agriculture, forest, herd and fish culture doesn’t need to levy the corporation profit tax. and second years and allowed a 50% reduction in the third to fifth years
- The Technology transfer profit within RMB5,000,000 doesn’t need to levy the corporation profit tax, the profit beyond RMB5,000,000 levy the halve corporation profit tax.
- The Especial Support High-Technology Advanced Corporation enrolled in Special Economic Zones (Shenzhen, Zhuhai, Shantou, Xiamen and Hainan Especial Economic Zone) and New Pudong District in Shanghai after 1 January 2008 doesn’t need to levy the corporation profit tax since the first annual get income taxable year till the second taxable year. From the third year to fifth year shall be levied the halve corporation profit tax rate of 25%.
The Transition Method of Former Tax Preference
- From 1 January 2008 onwards, the corporations which were enjoying the tax reference of low tax rate would transit into Legal Tax Rate bit by bit within five years. The corporations which were levied at the corporate profits tax rate of 15% would change into 18% in 2008, 2009 change into 20%, 2010 change into 22%, 2011 change into 24% and 2012 change into 25%; and the corporations which were levied at the corporate profits tax rate of 24% would change into 25% since 2008.
- The corporations which were enjoying “exemption for the first two years and half rate reduction for the subsequent three years” , “exemption for the first five years and half rate reduction for the subsequent five years” and other stable deduction tax preference would follow the former tax law, administration rules and correlation documents’ preferences till expire. The corporation which hasn’t enjoyed tax preferences due to not starting to get profit would count their preference term since 2008.
- The corporations which were enjoying above transition preference were those corporations registered in business administration and other registered department before 16 March 2007.
