The China Tax Guide (eBook)

Dezan Shira & Associates is a specialist foreign direct investment practice, providing business advisory, tax, accounting, payroll and due diligence services to multinationals investing in China, Hong Kong, India and Vietnam. Established in 1992, the firm is a leading regional practice in Asia with seventeen offices in four jurisdictions, employing over 170 business advisory and tax professionals. Dezan Shira & Associates provides a combination of business advisory and accounting services to our clients, giving them the ability to acquire professional knowledge in the local legal regulatory environment in each country as well as the tax and financial implications of doing so.We also provide useful business information through our media and publishing house, Asia Briefing.

1 An Introduction to Tax in China 8
1…Tax Planning as Part of Your China Investment Strategy 8
2…China’s Tax Laws and Administration 9
Tax Laws 9
Tax Administration 10
2 China’s Business Taxes 14
1…Corporate Income Tax 14
Tax Incentives 15
Grandfathering 15
Representative Offices 16
Actual Basis Method 17
Cost-Plus Method 17
Actual Revenue Deemed Profit Method 17
Dealing with Non-compliance 17
2…Withholding Tax 18
Administration of Withholding Tax 20
3…Value-Added Tax 21
VAT Reform 22
VAT Rates 23
General Taxpayer Status 23
VAT Calculation for General Taxpayers 24
VAT Calculation for Small Scale Taxpayers 24
Export Tax Rebates 24
Export Tax Rebate and Exemption Declaration Procedures 27
4…Business Tax 27
5…Consumption Tax 29
6…Other Specialist and Smaller Applicable Taxes 31
Urban Construction and Maintenance Taxes (UCMT) and Education Surcharge (ES) 31
Resource Tax 32
Land Appreciation Tax 32
Property Tax 33
Vehicle and Vessel Usage License Plate Tax 34
Stamp Tax 34
Deed Tax 35
Customs Duties 36
7…Tax Aspects of Processing and Assembly Operations 37
Tax Issues for LLJGs 37
Anti-avoidance Provisions and Practice 37
3 Expatriate Individual Income Tax in China 40
1…Individual Income Tax 40
2…Tracking Liabilities 40
3…Self Reporting Individual Income Tax Rules 41
4…Who Has to Pay? 44
Expatriates on Extended Business Trips to China 44
Foreigners Working for Legal Enterprises in China 44
Foreigners Holding Concurrent Posts Both in China and Elsewhere 44
China Residency Status and IIT on Your Worldwide Income 45
Work Permit Registration Procedures 45
5…Expatriate Tax Rates and Liabilities 45
6…Deductible Allowances 46
7…Provisional Examples of Benefits 47
8…Permits Required by Foreign Staff 47
Alien Employment License 47
Notification for Application of Employment Visa and Residence Permit 48
Alien Employment Permit 48
Residence Permit 49
9…Individual Income Tax for Local Staff 49
4 Audit 51
1…Audit items Often Queried by Chinese Independent Auditors 51
Adjustments for Foreign Related Payment Income 51
Related Party Transactions and Transfer Pricing 52
Withholding Obligations 52
Input VAT 52
VAT Refund on Export 52
Stamp Duty 53
2…General Accounting Treatments on Significant Audit Areas 53
Trade Debtors 53
Long-term Debt Investments 53
Fixed Assets 53
Fixed Asset Qualification 53
Residual Value 54
Depreciation Years 54
Accelerated Depreciation 54
Intangible and Other Assets 54
Pre-operating Expenses 54
Reserve Funds 54
Mandatory Company Fund Allocations 55
Special Attention to Stock Inventories 55
3…Other Required Annual Licensing and Renewals 56
Preparation for the Annual Cooperative Examination 56
Requirements for Annual Cooperative Examination Documents 56
4…Transfer Pricing Contemporaneous Documentation 57
5 Procedures for the Declaration and Repatriation of Dividends 59
1…Preparing for Declaration of Dividends in China 59
6 Double Tax Treaties and Agreements 61
1…Double Tax Treaties 61
Withholding Tax Rates 63
Income from Employment 63
Exchange of Information 64
Glossary of Terms 65