OVERVIEW OF CHINA'S CURRENT TAX SYSTEM
Value
Added Tax
There are 14 kinds of taxes currently applicable to the enterprises
with foreign investment, foreign enterprises and/or foreigners,
namely: Value Added Tax, Consumption Tax, Business Tax, Income
Tax on Enterprises with Foreign Investment and Foreign Enterprises,
Individual Income Tax, Resource Tax, Land Appreciation Tax,
Urban Real Estate Tax, Vehicle and Vessel Usage License Plate
Tax, Stamp Tax, Deed Tax, Slaughter Tax, Agriculture Tax, and
Customs Duties.
Compatriots from Hong Kong, Macao and Taiwan and overseas Chinese
and the enterprises with their investment are taxed in reference
to the taxation on foreigners, enterprises with foreign investment
and/or foreign enterprises. In order better to encourage inward
flow of funds, technology and intelligence, China provides numerous
preferential treatments in foreign taxation, and has successively
concluded tax treaties with 60 countries (by July, 1999): Japan,
the USA, France, UK, Belgium, Germany, Malaysia, Norway, Denmark,
Singapore, Finland, Canada, Sweden, New Zealand, Thailand, Italy,
the Netherlands, former Czechoslovakia, Poland, Australia, Bulgaria,
Pakistan, Kuwait, Switzerland, Cyprus, Spain, Romania, Austria,
Brazil, Mongolia, Hungary, Malta, the United Emirates of Arab,
Luxembourg, South Korea, Russia, Papua New Guinea, India, Mauritius,
Croatia, Belarus, Slovenia, Israel, Viet-Nam, Turkey, Ukraine,
Armenia, Jamaica, Iceland, Lithuania, Latvia, Uzbekistan, Bangladesh,
Yugoslavia, Sudan, Macedonia, Egypt, Portugal, Estonia, and
Laos, 51 of which have been in force.
Value
Added Tax
(1) Taxpayers
The VAT taxpayers include any enterprise, unit and other individual
engaged in sales of goods, importation of goods, provision of
services of processing, repairs and replacement (hereinafter
referred to as 'taxable services' in short) within the territory
of the People's Republic of China.
(2) Taxable items and tax rates
Table of VAT Taxable Items and Rates
| Coverage of collection |
Rates |
| Exportation of goods (except otherwise stipulated
by the State) |
0% |
1. Agriculture, forestry, products of animal
husbandry, aquatic products;
2. Edible vegetable oil and
food grains duplicates;
3.Tap water, heating, cooling,
hot air supplying, hot water, coal gas, liquefied petroleum
gas, natural gas, methane gas, coal/charcoal products
for household use;
4.Books, newspapers, magazines (excluding
the newspapers and magazines distributed by the post department);
5.Feeds, chemical fertilizers, agricultural chemicals,
Agricultural machinery and plastic covering film for farming;
6.Dressing metal mineral products, dressing non-metal
mineral products, coal. |
13% |
| Crude oil, mine salt and goods other than
those listed above, and services of processing, repairs
and replacement. |
17% |
(3) Computation of tax payable
a. Normal taxpayers
To compute the VAT payable, the normal taxpayers need to separately
calculate the output tax and the input tax for the current period.
Then the difference between the output tax and the input tax
shall be the actual amount of VAT payable.
The formula for computing the tax payable is as follows:
Tax payable = Output tax payable for the current period - Input
tax for the current period
Output tax payable = Sales volume in the current period ×
Applicable tax rate
b. Small taxpayers
Small taxpayers are taxed on the basis of the revenue derived
from sales of goods or provision of taxable services by applying
proper rates (4% for commercial sector, and 6% for other sectors).
The computing formula is:
Tax payable = Sales amount × Applicable rate
c. Importation
The imported goods are taxed on the basis of the composite assessable
price by applying the applicable tax rate.
d. VAT refund for exporters
In case of 0% rate applicable to the exported goods, the exporters
may apply to the tax authorities for the input tax refund on
those goods exported. At present, the refund rates consist of
5%, 6%, 9%, 11%, 13% and 17%.
(4) Tax exemptions
The exempted items include: self-produced primary agricultural
products sold by agricultural producing units and individuals;
imported goods being processed for exportation; the self-use
equipment imported out of the total investment for the projects
with foreign investment or domestic investment which are encouraged
by the State; contraceptive medicines and devices; antique books
purchased from the public; instruments and equipment imported
for direct use in scientific research, experiment and education;
imported materials and equipment granted by foreign governments
or international organizations; articles imported directly by
organizations for the disabled for exclusive use by the disabled. |
