China Corporate Income Tax – What is the Correct Tax Rate?

China Corporate Income Tax

According to the Enterprise / Corporate Tax Law. Centre O highlighted the few main articles about the Corporate Income Tax rate as below: 

Article 3

1. A Resident Enterprise should pay Corporate Income Tax on its income generated from both inside and outside China;
2. A Non-Resident Enterprise has set up institutions or establishments in China. It should pay Corporate Income Tax on the income earned by its institutions or establishments from inside China. The income generated from China, but the revenue is actually relevant to the institutions or establishments set up in China.
3. A Non-Resident Enterprise has not set up any institutions or establishments in China. Or it has set up, but the income is not actually relevant to the stated institutions or establishments. The enterprise should pay tax on the portion of the income generated from inside China.

Article 4

1. The rate of Corporate Income Tax is 25%
2. Non-Resident Enterprise as specified in the Article 3(3), the applicable tax rate is 20%.

So, you may think the China Corporate Tax is either 25% or 20%. The tax rate depends on your enterprise type. 

Furthermore, there are more interpretations on Regulation on the Implementation of Corporate Income Tax, it stated that:

Article 91

• Income earned by non-resident enterprises as cited in Article 27 of the Enterprise / Corporate Tax Law shall be subject to a reduced enterprise income tax rate of 10%.

What is mentioned in Article 27? 

There are exemption or tax reduction on following incomes:

1. Incomes from projects of agriculture, forestry, husbandry and fishery;
2. Revenues from business operations of the state supported important public infrastructure investment projects.
3. Incomes from qualified projects of environmental protection, energy and water saving.
4. Revenues from the qualified transferal of technology project.
5. Incomes generating from Article 3(3)

Finally, we figured out the Corporate Income Tax Rate in Article 3(3) is 10%, not 20%. 

Why we don’t tell you the correct Tax Rate instead?

We take an effort to explain to all of you. The Regulation is not straight forward as well. We need to take time to go thought the regulation line by line. In addition, this is also the reason why the China Tax Law seems so difficult to understand. 

Let’s have a Corporate Income Tax Summary 

Summary:

25% for all Resident Enterprises & Non-Resident Enterprise which have set up Institutions and establishments. Income generating from both inside and outside China. 

10% for Non-Resident Enterprises, no matter they have set up Institutions and Establishments or not. Income generating from inside China. 

0% for Non-Resident Enterprises which generated revenue outside China. 

For further information, please contact us. 

You may want to read: HONG KONG TAXATION CONSTITUTION VS CHINA TAXATION CONSTITUTION