01
Tax residency and tax base
A company organized under the laws of the People's Republic of China is usually a tax resident of China. A foreign company may also be considered a resident if its place of effective management is in the PRC. A resident enterprise is subject to tax on income from Chinese and foreign sources; the volume of obligations of a non-resident depends on the presence of an establishment/place and the connection of income with it.
- Who pays
- Resident enterprises and relevant non-residents
- Tax base
- Income minus exemptions, exemptions, allowable expenses and carry forward losses
- What to check
- Place of management, permanent establishment, source of income, tax treaty
02
Corporate Income Tax - CIT
The standard Enterprise Income Tax rate is 25%. Reduced rates and other incentives apply only when specified criteria are met - for example, for qualified high-tech or small low-profit enterprises. The benefit cannot be accepted only by the name of the activity: the industry, indicators, personnel, assets, R&D and supporting documents are checked.
- Standard rate
- 25%
- Billing period
- Tax year; usually coincides with the calendar
- Advance payments
- Monthly or quarterly - within 15 days after the end of the period
- Annual calculation
- Within five months after the end of the year
- Key adjustments
- Eligible expenses, deduction limits, depreciation, losses, related parties
Accounting income does not equal taxable income: separate tax reconciliations are required for expenses, benefits, provisions and related party transactions.
03
Value added tax - VAT
From 1 January 2026, VAT is regulated by a separate law and rules for its application. Basic rates - 13%, 9% and 6%; the specific rate depends on the type of goods, services, intangible assets and real estate. For certain exports and cross-border transactions, a zero rate or exemption is possible, subject to conditions and documentary evidence.
- 13%
- Basic rate for most goods and some transactions
- 9%
- Certain goods, transport, real estate and other intended operations
- 6%
- Many services and transactions with intangible assets
- Input VAT
- Credit if you have the right to deduct and proper documents / fapiao
- Period
- Determined by taxpayer regime and administration rules
Before sales begin, each revenue must be matched to the rate, type of fapiao, when the obligation arose and the right to input deduction.
04
Withholding tax on cross-border payments
For a number of non-resident incomes from sources in China, withholding tax is applied. For dividends to non-resident enterprises the basic effective rate is usually 10%, but the tax treaty may provide for a reduction. Application of the agreement requires an analysis of residency, beneficial owner of income and documents.
- Typical payments
- Dividends, interest, royalties and certain other income from a Chinese source
- Basic reference
- 10% for qualifying passive income of a non-resident enterprise
- Possible reduction
- Subject to applicable double tax treaty
- Responsible
- Chinese payer as tax agent
- Before payment
- Check the contract, source, beneficial owner, residence certificate and currency documents
05
Additional taxes and mandatory payments
In addition to CIT and VAT, the model may include urban maintenance and construction tax, educational allowances, stamp tax, real estate and land taxes, customs payments, consumption tax, as well as social contributions. Composition and size depend on operations, assets and location.
VAT, customs duties, consumption tax for certain goods.
Stamp tax for documents and transactions required by law.
Taxes on real estate, land and land appreciation - for a specific asset.
Individual tax, withholding, social security and housing fund.
06
Transfer pricing and related parties
Transactions between related parties must comply with the arm's length principle. Forms for related transactions are submitted along with the annual CIT reporting; Depending on the structure and thresholds, local file, master file, special issue file and country-by-country reporting may be required.
- Typical Operations
- Goods, services, financing, intangible assets and cost sharing
- Basic standard
- Arm’s length principle
- Reporting
- Annual Related-Party Transaction Reporting Forms along with the annual CIT return
- Documentation
- Check local file, master file, special file and CbCR thresholds
- Control
- Functions, assets, risks, comparability and actual receipt of services
07
Basic tax reporting calendar
VAT and other current declarations for the period established for the company; CIT advances - within 15 days after the period.
Checking WHT, tax agreement, beneficial owner, contractual and banking documents.
Annual CIT declaration and final payment – within five months.
Related party reporting and verification of the obligation to prepare TP documentation.
The exact dates of current returns and local requirements are confirmed in the electronic tax system and with the company's competent tax authority.
08
What to collect before surgery
- 01
Map of all types of revenue, expenses, imports, exports and cross-border payments.
- 02
Tax qualification of each transaction: CIT, VAT rate, fapiao, WHT and additional fees.
- 03
List of related parties, contracts, services, loans, licenses and IP objects.
- 04
Calendar of declarations, responsible employees and a package of supporting documents.
- 05
Reconciliation of the tax model with the banking and currency circuit before the first payment.