About HKTDC | Media Room | Contact HKTDC | Wish List Wish List () | My HKTDC |
繁體 简体
Save As PDF Print this page
Qzone

Major Taxes for FIEs and Foreigners

Value-added Tax

As a type of turnover tax, value-added tax (VAT) is levied on the value-added arising from the sales of goods, the provision of taxable services or the carrying out of taxable activities within the territory of China as well as on the import of goods. All enterprises and individuals engaged in the sale or import of goods; provision of processing, repair or maintenance services; sales services; intangible assets and real properties in China have to pay VAT.

(a)  In China, VAT payers are divided into general taxpayers and small-scale taxpayers on the basis of their operation scale and accounting and auditing system, with different methods of tax computation.

Small-scale taxpayers are taxpayers without a sound accounting and auditing system whose annual taxable sales amount is below the prescribed standards and who cannot report related tax information in accordance with regulations.

According to the decision of the executive meeting of the State Council on 28 March 2018, effective on 1 May 2018, for industrial and commercial enterprises, the prescribed standards for annual taxable sales amounts of less than RMB500,000 and RMB800,000 for small-scale taxpayers have both been adjusted upwards to RMB5 million, and that, within a given time, enterprises previously registered as general taxpayers will be allowed to switch their status to small-scale taxpayers.

General taxpayers mainly refer to enterprises whose annual taxable sales amount exceeds that of small-scale taxpayers. Small-scale taxpayers with a sound accounting and auditing system who can provide accurate tax information may be classified as general taxpayers. However, individuals other than operators of individually-owned businesses are considered small-scale taxpayers even if their annual taxable sales amount exceeds the prescribed standard. Entities and individually-owned businesses with annual taxable sales amount exceeding the presecribed standard but do not regularly engage in taxable activities can choose to pay taxes as small-scale taxpayers.

(b)  Method of Computation

  • Small-scale taxpayer

    VAT on the sale of goods or taxable services payable by small-scale taxpayers is calculated by a simple method on the basis of the sales amount (excluding tax payable) and the prescribed 3% tax rate (irrespective of industrial or commercial operations) without offset or deduction for input VAT. Special VAT invoice may not be issued, but tax authorities can issue special VAT invoice on behalf of small-scale taxpayers. The formula for the computation of VAT is as follows:

    Tax payable = sales amount x tax rate (3%)

    According to Article 28 of the Detailed Rules for the Implementation of the Interim Regulations on VAT promulgated in 2008: “The criteria for small-scale taxpayers mentioned in Article 11 of these Regulations are as follows: (1) Taxpayers engaged in the production of goods or the provision of taxable services, and taxpayers engaged principally in the production of goods or provision of taxable services and also in the wholesaling or retailing of goods, with an annual taxable sales amount of RMB500,000 or less; (2) Taxpayers other than those prescribed in the previous paragraph with an annual taxable sales amount of RMB800,000 or less. The term ‘taxpayers engaged principally in the production of goods or provision of taxable services’ mentioned in paragraph (1) of this Article refers to taxpayers whose annual production of goods or provision of taxable services account for more than 50% of their annual taxable sales amount.” Article 1 (5) of Annex 2 (Provisions on Relevant Matters Concerning the Pilot Programme of Replacing Business Tax with Value-added Tax) in the Circular of the Ministry of Finance and the State Administration of Taxation on Comprehensively Implementing the Pilot Programme of Replacing Business Tax with Value-added Tax (Cai Shui No. 36 [2016]) stipulates that “the prescribed standard for taxable annual sales amount for general taxpayers is RMB5 million”. The VAT tax rate for small-scale taxpayers has been adjusted to 3% across the board.

  • General taxpayer

    The actual amount of VAT payable by general taxpayers is the excess amount of output VAT over input VAT paid or borne. The formula for the computation of the tax payable is as follows:

    Tax payable = current output VAT – current input VAT

    Output VAT = sales amount x applicable tax rate

    If the current output VAT is smaller than the current input VAT, the amount that cannot be fully offset or deducted may be carried over to the following tax period.

    According to the provisions of the Measures for the Administration of the Registration of General VAT Taxpayers (the Measures) which took effect on 1 February 2018. VAT taxpayers (hereinafter referred to as taxpayers) with an annual taxable sales amount exceeding the criteria for small-scale taxpayers set by the Ministry of Finance and the State Administration of Taxation should register with the competent tax authority as general taxpayers except as stipulated in Article 4 of the Measures. Here, annual taxable sales amount refers to the cumulative sales value subject to VAT within a continuous operational period of not less than 12 months or four quarters, including the sales amount in the tax return, the sales amount added upon audit and the sales amount adjusted upon tax assessment. [1]

  • VAT on imported goods

    VAT on goods imported by taxpayers is computed on the basis of the composite assessable value and the applicable tax rate without offset or deduction for input VAT. (This applies only to VAT collected by the Customs Office. Import-related VAT (except fixed assets) not paid by importers may not be deducted for input VAT). The formula for the computation of the tax payable is as follows:

    Tax payable = composite assessable value x applicable tax rate

    Composite assessable value = customs dutiable value + customs duty

    The composite assessable value of VAT on goods imported includes customs duty already paid. If the goods imported are subject to consumption tax, the composite assessable value should also include the consumption tax already paid.

(c)  Taxable Transactions and Tax Rates

From 1 July 2017 onwards, China’s VAT brackets have been reduced from four to three: 17%, 11% and 6%. With the elimination of the 13% bracket, farm produce and natural gas, which used to be subject to the 13% rate, are now subject to the 11% rate. Details are as follows:

(1) A tax rate of 17% applies to taxpayers who sell or import goods (except for goods otherwise listed); provide services in processing, repair or maintenance; or provide leasing services in tangible properties. (2) A tax rate of 11% applies to taxpayers providing services in transportation, postal, basic telecoms, construction, real property leasing and sales; transfer of land-use rights; or the sales or importation of the following goods: 1. grain, edible vegetable oil and edible salt; 2. tap water, heating, air conditioning, hot water, coal gas, liquefied petroleum gas, natural gas, dimethyl ether, methane, and coal products for domestic use; 3. books, newspapers, magazines, audio-video and electronic publications; 4. feeds, chemical fertilisers, pesticides, agricultural machinery and agricultural plastic films; and 5. other commodities specified by the State Council. (3) A zero tax rate applies to taxpayers who export goods. (4) A tax rate of 6% applies to taxpayers who provide value-added telecoms services, financial services, modern services (excluding leasing services), lifestyle services or sell intangible assets (other than land-use rights). (5) A zero tax rate applies to domestic entities and individuals carrying out cross-border sales of services and intangible assets within the scope stipulated by the State Council.

At the executive meeting of the State Council on 28 March 2018, it was decided that, with effect from 1 May 2018, the VAT rate of manufacturing and other industries would be reduced from 17% to 16%, while the VAT rate for services in transportation, construction and basic telecoms and for certain goods such as farm produce would be cut from 11% to 10%. Businesses in advanced manufacturing such as equipment manufacturing, qualified modern service companies such as those engaged in R&D services and companies operating electrical grids would be entitled to a one-off rebate of excess input VAT credit accumulated over a specific period of time.

(d)  Export Tax Exemption and Rebate

China implements a zero tax rate on exports. There is no export-related tax. Subject to the type of product, tax payment made in respect of the stages preceding export will be partially or fully refunded.

(e)  Special VAT Invoice

  • General taxpayers may purchase special VAT invoices from the tax authorities. Small-scale taxpayers and non-VAT taxpayers may not purchase or use such invoices.

  • General taxpayers selling taxable items must issue special VAT invoices to buyers. However, for the sale of taxable items to consumers and the sale of duty-free goods or goods for export, special VAT invoices should not be issued. The same applies to transactions considered to be the same as the sale of goods. It is also not mandatory to issue special VAT invoices for the sale of taxable items to small-scale taxpayers.

  • Special VAT invoices that are not up to specifications may not be used to offset input VAT.

(f) Tax Liability and Payment Period

In the sale of goods or provision of taxable services, the VAT liability arises on the day the taxpayer receives full payment for the transaction or obtains a payment voucher for the transaction. In the case of import goods, VAT liability arises on the day of customs declaration.

The payment period may be one day, three days, five days, 10 days, 15 days, one month or one quarter, to be determined by the competent tax authorities based on the amount of VAT payable by the taxpayer. Taxpayers who cannot pay the tax at fixed time intervals may pay on a per transaction basis.

Consumption Tax

Consumption tax is a tax levied on a small number of consumer goods and on specific consumption activities on top of VAT universally levied on the sale of goods. Currently consumption tax mainly covers tariff lines such as cigarettes, alcoholic drinks, firecrackers and fireworks, high-end cosmetics, refined oil, fine jewellery and precious stones, golf balls and equipment, high-end watches, yachts, disposable wooden chopsticks, wooden floor panels, motorcycles, small motor cars, batteries and coatings. Some tariff lines are further divided into sub-tariff lines.

Consumption tax is included in the transaction price and is only payable on the production, subcontracted processing, importation, retailing and transfer for usage of taxable consumer goods as well as on the wholesaling of cigarettes. The tax is ultimately borne by consumers.

(a)  Taxpayers

Payers of consumption tax are entities and individuals engaged in the production, subcontracted processing, selling and importation of taxable consumer goods in China as specified in the Interim Regulations of the People’s Republic of China on Consumption Tax. Specifically they include state-owned enterprises, collective enterprises, private enterprises, joint-stock enterprises and other enterprises engaged in the production, subcontracted processing, retailing and importation of taxable consumer goods in China, as well as administrative departments, institutions, military units, social groups and other entities, individual business operators and other individuals. According to the Circular of the State Council on Several Issues Concerning the Interim Regulations on the Application of VAT, Consumption Tax, Business Tax, Etc. to FIEs and Foreign Enterprises, FIEs and foreign enterprises engaged in the production, subcontracted processing, retailing and importation of taxable consumer goods in China are also payers of consumption tax.

(b)  Taxable Items and Tax Rates

Items Subject to Consumption Tax and Tax Rates

ItemTax Rate
I. Cigarettes (Production stage) 
  1. Rolled cigarettes 
    (i) Category A rolled cigarettes (priced at RMB70 or above per carton)56% + RMB0.003/stick
    (ii) Category B rolled cigarettes (priced below RMB70 per carton)36% + RMB0.003/stick
    (iii) Wholesale stage11% + RMB0.005/stick
  2. Cigars36%
  3. Cut tobacco30%
II. Alcoholic drinks 
  1. White spirits20% + RMB0.5/500 g
(or 500 ml)
  2. Yellow rice wineRMB240/ton
  3. Beer 
    (i) Category A beerRMB250/ton
    (ii) Category B beerRMB220/ton
  4. Other alcoholic drinks10%
III. High-end cosmetics15%
IV. Fine jewellery and precious stones 
  1. Gold and silver jewellery, platinum jewellery, diamonds, and diamond jewellery5%
  2. Other precious jewellery and precious stones10%
V. Firecrackers and fireworks15%
VI. Refined oil products 
  1. GasolineRMB1.52/litre
  2. Diesel oilRMB1.20/litre
  3. Aviation keroseneRMB1.20/litre
  4. NaphthaRMB1.52/litre
  5. Solvent oilRMB1.52/litre
  6. Lubricant oilRMB1.52/litre
  7. Fuel oilRMB1.20/litre
VII. Motorcycles 
  1. With engine of 250cc3%
  2. With engine of more than 250cc10%
VIII. Small motor cars 
  1. Passenger cars 
    (i) With engine of 1,000cc or below1%
    (ii) With engine of 1,000cc - 1,500cc3%
    (iii) With engine of 1,500cc - 2,000cc5%
    (iv) With engine of 2,000cc - 2,500cc9%
    (v) With engine of 2,500cc - 3,000cc12%
    (vi) With engine of 3,000cc - 4,000cc25%
    (vii) With engine of over 4,000cc40%
  2. Medium/light-duty commercial passenger cars5%
IX. Golf balls and equipment10%
X. High-end watches20%
XI. Yachts10%
XII. Disposable wooden chopsticks5%
XIII. Wood floor panels5%
XIV. Batteries (except mercury-free primary batteries, nickel-metal hydride rechargeable batteries, lithium primary batteries, lithium-ion rechargeable batteries, solar cells, fuel cells and all-vanadium redox-flow cells)4%
XV. Coatings (except volatile organic compounds (VOCs) of 420 g or less / litre when applying)4%

 

(c)  Method of Computation

  • For tax payable by volume, the sales volume is used as the basis:

    Tax payable = sales volume x tax amount per unit

  • For tax payable by value, the sales value is used as the basis:

    Tax payable = sales (or import) value x tax rate

  • For tax payable under the combination of by volume and by value:

    Tax payable = sales volume x tax amount per unit + sales value x tax rate

(d)  Tax Liability and Payment Period

In the sale of taxable consumer goods, consumption tax liability arises on the day the taxpayer receives full payment for the transaction or obtains a payment voucher for the transaction. In the import of goods, consumption tax liability arises on the day of customs declaration.

The consumption tax payment period may be one day, three days, five days, 10 days, 15 days, one month or one quarter, to be determined by the competent tax authorities based on the amount of consumption tax payable by the taxpayer. Tax that cannot be paid at fixed time intervals may be paid on a per transaction basis.

Customs Duty

Customs duty is levied by Customs on commercial commodities or articles entering or leaving China’s national boundaries or customs territories.

(a)  Taxpayers

Payers of customs duty on commercial commodities are consignees of imports and consignors of exports. The former have to pay import tariffs while the latter have to pay export tariffs. Payers of customs duty on articles include: incoming passengers carrying personal luggage and articles, service attendants on different modes of transport carrying personal articles, owners of gifts and personal articles that enter China through other means, and addressees of incoming personal postal articles.

(b)  Tariff Rates

China adopts double-column tariffs for imports: a general rate and a preferential rate. The general tariff rate applies to goods from countries and regions that have not signed reciprocal tariff agreements with China, while the preferential tariff rate applies to goods from countries and regions that have signed such agreements with China.

(c)  Dutiable Value

The dutiable value of imported goods in general is their CIF price while the dutiable value of exports is their FOB price.

(d)  Method of Computation

Customs duty payable is calculated by multiplying the dutiable value and quantity of the goods imported or exported by the applicable tax rate or tax amount. The formula for calculating the amount of customs duty payable is as follows:

Duty payable = quantity of taxable import or export x unit dutiable value x applicable tax rate

or

Duty payable = quantity of taxable import or export x applicable standard tax amount

(e)  Payment of Customs Duty

Taxpayers or their agents should make payment at designated banks within 15 days from the date of issuance of the customs duty payment notice by Customs.

Enterprise Income Tax

Enterprise income tax is a kind of tax levied on the income derived from production, business operations and other sources as well as income at liquidation generated by enterprises and business entities in China.

(a)  Taxpayers

Payers of enterprise income tax are enterprises and other organisations within the territory of China that have incomes. They include the following seven categories: (1) state-owned enterprises, (2) collective enterprises, (3) private enterprises, (4) associated enterprises, (5) joint-stock enterprises, (6) foreign-invested enterprises and foreign enterprises, and (7) other organisations with income from production and business operations and other sources.

(b)  Objects of Taxation

Taxpayers are generally divided into resident enterprises and non-resident enterprises in line with international practice. This is the basis for determining whether a taxpayer has full tax liability. A resident enterprise is an enterprise incorporated in a country in accordance with its laws and regulations, or an enterprise whose office of effective management or head office is located within the territory of that country. Resident enterprises are enterprises incorporated within the territory of China in accordance with Chinese laws and regulations or with their offices of effective management within the territory of China. For example, Wal-Mart (China) and General Motors (China) registered and incorporated in China are Chinese resident enterprises. Companies registered in Britain, the Bermuda Islands and other countries and regions but whose offices of effective management are located within the territory of China are also Chinese resident enterprises. Resident enterprises have to pay enterprise income tax on their income derived from sources within and outside China.

Non-resident enterprises are enterprises that do not meet the criteria for resident enterprises under the tax laws of a country. Non-resident enterprises that have establishments or venues in China have to pay enterprise income tax on their income derived from sources in China, as well as income derived from sources outside China but is effectively connected with these establishments or venues. Non-resident enterprises that do not have any establishments or venues in China, or those that have establishments or venues in China but whose income is not effectively connected with these establishments or venues, have to pay enterprise income tax on their income derived from sources in China.

(c)  Taxable Items and Tax Rates

  • The rate of enterprise income tax is 25%.

  • Non-resident enterprises that do not have any establishments or venues in China, or those that have establishments or venues in China but whose income is not effectively connected with these establishments or venues, have to pay tax at the rate of 20% on the income derived from sources in China. However, a 10% tax rate applies when the actual tax is levied.

(d)  Method of Computation

Taxable income = total annual income of enterprise – (income not subject to taxation + income exempted from taxation + deductible items + losses from previous years permitted to be offset)

Tax payable = (taxable income of enterprise x applicable tax rate) – tax reductions and exemptions as stipulated in the relevant provisions of the enterprise income tax law

(e)  Filing of Tax Returns

Income tax is levied on an annual basis and paid in advance in monthly or quarterly instalments. Taxpayers should file their income tax returns with the local tax authorities and pay the tax within 15 days as from the end of each month or each quarter. They should file their annual income tax returns together with their final account statements within five months as from the end of each tax year, and make their final settlement. Any overpayment will be refunded and underpayment invoiced at a later date.

For entities that have no establishment or venue in China but derive incomes from profits, interest, rentals, royalties and other incomes from sources in China, and for those that do have establishments or venues in China but derive incomes that are not effectively connected with such establishments or venues, the income beneficiary should be the taxpayer and the payer should be the withholding agent. The tax should be withheld from the amount of each payment by the payer. The withholding agent should, within seven days, turn the amount of taxes withheld on each payment over to the state treasury and submit a withholding income tax return to the local tax authorities.

Individual Income Tax

Individual income tax is a general term of the legal norms for the adjustment of social relations arising between tax collection offices and natural persons (residents and non-residents) in the process of the collection, payment and management of individual income tax. Individuals who have domicile in China or who have no domicile in China but have resided in China for one year or more with income derived from sources within and outside China, or individuals who have no domicile and do not reside in China or who have no domicile but have resided in China for less than one year with income derived from sources within China, are taxpayers of individual income tax. The Standing Committee of the 11th NPC adopted the decision to amend the Individual Income Tax Law at the end of June 2011, on the basis of which the threshold for tax exemption was raised to RMB3,500 a month with effect from 1 September 2011. In 2018, further reform of individual income tax was proposed at the first session of the 13th NPC. The Ministry of Finance is currently taking the initiative in drafting the Individual Income Tax Law (Amendment), which is expected to be completed by the end of 2018 and the burden on taxpayers will be further reduced.

(a)  Taxpayer and Tax Liability

  • Resident taxpayers refer to Chinese citizens and foreign nationals residing in China. They are individuals domiciled in China (who, by reason of their permanent registered address, family or economic interests, habitually reside in China); or foreign nationals, overseas Chinese, and residents of Hong Kong, Macau and Taiwan who have resided in China for a calendar year in a tax year. Resident taxpayers are subject to unlimited tax liability in China on incomes from global sources.

  • Non-resident taxpayers refer to foreign nationals, overseas Chinese and residents of Hong Kong, Macau and Taiwan who are neither domiciled nor resident in China; or foreign nationals, overseas Chinese and residents of Hong Kong, Macau and Taiwan who are not domiciled in China and have resided in China for less than a year in a tax year. Non-resident taxpayers are subject to limited tax liability and are required to pay individual income tax to the Chinese government only on incomes from sources inside China.

(b)  Taxable Items, Tax Rates and Standard Deductions

  • Income from wages and salaries

    Tax payable = taxable income x applicable tax rate – allowable deductions

    Standard deduction: RMB3,500/month or RMB4,800/month [2]

    Taxable income = monthly income after deducting premiums of unemployment, medical and pension insurance and provident fund payments – standard deduction

 

Monthly Taxable Income
(Tax-inclusive, RMB)
Tax RateQuick Deduction
(RMB)
Not exceeding 1,5003%0
Over 1,500 to 4,50010%105
Over 4,500 to 9,00020%555
Over 9,000 to 35,00025%1,005
Over 35,000 to 55,00030%2,755
Over 55,000 to 80,00035%5,505
Over 80,00045%13,505

 

  • Tax brackets for individually-owned businesses

    Applicable to income derived by individually-owned businesses from production and business activities and income derived by enterprises and institutions from subcontracting or leasing.

 

BracketAnnual Taxable Income
(Tax-inclusive, RMB)
Tax RateQuick Deduction
(RMB)
1Portion not exceeding 15,0005%0
2Portion from 15,000 to 30,00010%750
3Portion from 30,000 to 60,00020%3,750
4Portion from 60,000 to 100,00030%9,750
5Portion over 100,00035%14,750

 

  • Income from remuneration for labour service

    Income from the remuneration for labour service is taxable on each payment, where a proportional tax rate of 20% applies. For remuneration in a single payment in excess of RMB20,000, extra tax will be levied. For the part of taxable income exceeding RMB20,000 but less than RMB50,000, after calculating the tax payable, an additional 50% on the tax payable will be levied; and for the part exceeding RMB50,000, an additional 100% on the tax payable will be levied.

  • Income from author’s remuneration

    Income from author’s remuneration is taxable on each payment for every publication or release. For remuneration received in each payment of less than RMB4,000, a deduction of RMB800 is allowed for expenses. For each payment of RMB4,000 or more, a deduction of 20% is allowed for expenses and the remaining amount is the taxable income. Tax payable is computed at a rate of 20%, with a further deduction of 30% on the amount of tax payable.

    Taxable income = income from taxable item – RMB800 (or income from taxable item x 20%)

    Tax payable = taxable income x 20% x (1 – 30%)

  • Income from royalties and property leasing

    Such income is taxable on each payment. For remuneration received in each payment of less than RMB4,000, a deduction of RMB800 is allowed for expenses. For each payment of RMB4,000 or more, a deduction of 20% is allowed for expenses. The remaining amount will be taxed at 20%.

    Taxable income = income from taxable item – RMB800 (or income from taxable item x 20%)

    Tax payable = taxable income x 20%

  • Income from transfer of property

    Income from the transfer of property is taxed at a rate of 20%.

    Taxable income = income from transfer of property – original value of property – reasonable expenses

    Tax payable = taxable income x 20%

  • Income from interest, dividends and bonuses, contingent income and other income

    The applicable proportional tax rate is 20%.

    Tax payable = income from each payment x 20%

  • Income from interest on savings deposits

    Income from interest accrued before 31 October 1999 is not subject to individual income tax; income from interest on savings deposits accrued from 1 November 1999 to 14 August 2007 is taxed at the proportional tax rate of 20%; income from interest on savings deposits accrued from 15 August 2007 to 8 October 2008 is taxed at the tax rate of 5%; income from interest on savings deposits accrued on or after 9 October 2008 will not be subject to taxation for the time being.

    For individuals of foreign nationality and individuals who are residents of Hong Kong, Macau or Taiwan receiving income from interest on savings deposits within the territory of China, where the tax rate stipulated in the tax agreement signed between their resident country (or region) and the Chinese mainland (including the tax arrangements signed between the Mainland and the Hong Kong Special Administrative Region and the Macau Special Administrative Region respectively) is lower than that stipulated in China’s laws and regulations, they may enjoy the benefits of the agreement, provided that they submit application for the entitlement of such tax agreement benefits. Where the tax rate in the agreement is higher than that stipulated in China’s laws and regulations, they may be taxed at the rate stipulated in China’s laws and regulations.

(c)  Filing of Tax Returns

Tax returns may be filed by taxpayers themselves or by withholding agents.

(d)  Tax Concession

According to the circular (Cai Shui No. 39 [2017]) jointly issued by the Ministry of Finance, the State Administration of Taxation and the China Insurance Regulatory Commission on launching a pilot individual income tax policy on commercial health insurance nationwide, as of 1 July 2017 the expenses of individuals on eligible commercial health insurance products are allowed a maximum pre-tax deduction of RMB2,400 per year.

Land Appreciation Tax

Land appreciation tax is levied on entities and individuals on incomes derived from the transfer of state-owned land-use rights, buildings and their attached facilities (hereinafter referred to as transfer of real estate), and are assessed at a prescribed tax rate on the basis of the land value appreciation amount derived by the taxpayer from the transfer of real estate.

(a)  Taxable Objects

The taxable objects of land appreciation tax are the land value appreciation amounts derived from the transfer of real estate. Taxpayers of land appreciation tax are entities and individuals who transfer real estate and derive income from such transactions.

(b)  Tax Rates and Computation of Tax Payable

  • Appreciation amount

    The land value appreciation amount is the excess of the consideration received from the transfer of real estate over the total deductible amount.

  • Deductible items

    Deductible items for the transfer of state-owned land-use rights include amounts paid for the acquisition of land-use rights, costs and expenses for the development of land, taxes and fees related to the transfer of land-use rights, and other deductible items as stipulated by the Ministry of Finance.

    Deductible items for the transfer of newly built properties include amounts paid for the acquisition of land-use rights, costs and expenses for the construction of new buildings, taxes and fees related to the transfer of real estate, and other deductible items as stipulated by the Ministry of Finance.

    Deductible items for the transfer of used properties and buildings include the assessed value of the properties and buildings, the land price paid for the acquisition of land-use rights, expenses as stipulated by the state, taxes and fees payable during the transfer stage, and other deductible items as stipulated by the Ministry of Finance.

    After business tax to VAT conversion, a taxpayer’s taxable income from the transfer of real estate must be VAT-exclusive. The taxable income derived from the transfer of real estate for land appreciation tax should exclude the amount of output VAT whether the taxpayer is using the general method or the simplified method of computing VAT.

  • Tax rates

    Land appreciation tax is levied at progressive rates at four levels:

Appreciation AmountTax RateQuick Deduction
Portion not exceeding 50% of total deductible amount30%0%
Portion exceeding 50% but below 100% of total deductible amount40%5%
Portion exceeding 100% but below 200% of total deductible amount50%15%
Portion exceeding 200% of total deductible amount60%35%

 

(c)  Filing of Tax Returns

Taxpayers should file their tax returns together with the necessary documents to the tax authorities at the place where the real estate is located within seven days of the signing of the real estate transfer agreement. The necessary documents include the real estate title deed and land-use rights certificate, land transfer or real estate sale and purchase agreement, real estate valuation report and other relevant documents.

 


[1]  According to Article 4 of the Measures for the Administration of the Registration of General VAT Taxpayers, the following VAT taxpayers should not register as general VAT taxpayers: (1) those who are paying tax as small-scale taxpayers in accordance with policy regulations; (2) other individuals with annual taxable sales amount exceeding the prescribed standard.

[2]  The RMB4,800 standard deduction is applicable for: (1) foreign nationals working in foreign-invested enterprises and foreign enterprises in China; (2) foreign experts who are employed by and have drawn salaries from enterprises, institutions, social groups and state authorities in China; and (3) individuals who have domicile in China and who are working or employed outside of China and are drawing salary.

Content provided by Picture: HKTDC Research
Comments (0)
Shows local time in Hong Kong (GMT+8 hours)

HKTDC welcomes your views. Please stay on topic and be respectful of other readers.
Review our Comment Policy

*Add a comment (up to 5,000 characters)