Corporate Income Tax
Enterprise Income Tax is a tax imposed on income derived from production activities and business operations by enterprises within China and other organisations. Taxpayers of Enterprise Income Tax shall pay the Enterprise Income Tax in accordance with Enterprise Income Tax Law of the People's Republic of China, except for sole proprietorship and partnership.
Object of Taxation
- The corporations within China and the profit organisations are the taxpayer of corporation income tax.
- Corporations were distinguished Resident Corporation from Non-resident Corporation.
- Resident Corporation is the corporation which enrolled in People's Republic of China and enrolled in other country but the management organisation is in China.
- Non-resident Corporation is the corporation which enrolled in other country and the management organisation is not in China, but has establishments or places within China. Or else, it doesn't have establishments or places in China but there are some profits derived from sources within China.
Scope of Charge
- Resident Corporation should be taxed on their profits derived from sources within or out of China.
- Non-Resident Corporation which has establishments or places in China should be taxed the Corporation Income Tax on their profits derived from the establishments or places in China, and the profits doesn't derived from China but have relationship with the establishments or places in China should also be taxed. The corporations which doesn't have establishments or places in China and have establishments or places in China but their profits doesn't have relationship with the establishments or places should be taxed the Corporation Income Tax on their profits derived from sources within China.
Tax Rate of Corporation Income Tax
|Type of Corporation||Tax Rate|
|Especial Support High-Technology Advanced Corporation||15%|
Mini-type Small Profit Corporation:
Enterprises engaged in industries that are not restricted or prohibited by the state and meeting the three requirements of not exceeding RMB 3 million in annual taxable income, not exceeding 300 employees, and not exceeding RMB 50 million in total assets.
Corporation annual taxable year's total profits, deduction of non-tax profit, exempt-tax profit, costs, expense, taxes and the last taxable year's losses.
Income Tax Payable
Income Tax Payable = Taxable Profit × Tax Rate
Especially Tax Regulate
- Tax department is entitled to regular according reasonable method if the business between corporation and affiliated part doesn't accord with Independent Business Principle; reduce corporation or their affiliated part's tax profit or income.
- Corporation could request tax department to put forward the business price tenet and account method between corporation and their affiliated part; tax department would discuss that with corporation and preengage the price after corporation affirmance.
Preferential Enterprise Income Tax Policy
Low-rate Preferential Enterprise Income Tax Policy
- Qualified small low-profit enterprises: 20%
- During the period from 1 January 2019 to 31 December 2021, the income tax for a small-sized meager-profit enterprise shall be calculated at progressive rates. If the annual taxable income does not exceed 1 million yuan, the enterprise income tax shall be paid on 25% of the taxable income at the rate of 20%.
- Qualified enterprises with core intellectual property supported vigorously by the state and meet specific conditions: 15%
- Interest income derived from national debt
- Dividend, bonus and other equity investment income among qualified resident enterprises.
- Income derived from equity investment, such as dividend and bonus, which obtained from resident enterprises by non-resident enterprises that have set up institutions or establishments in China with an actual relationship with such institutions or establishments
- Specific income of qualified non-profit organisations
Tax-exempt and Tax-reduced Income
- Income derived from projects in relation to agriculture, forestry, animal husbandry and fisheries by enterprises
- Income derived from investment and operation of infrastructure projects supported by the state vigorously
- Income derived from qualified projects in relation to environmental protection, energy and water conservation
- Income derived from qualified transfer of technology by enterprises
- Non-resident enterprises
- Small low-profit enterprises
- High-tech enterprises
- Tax Reduction or Exemption for Autonomous Regions
- Research and development expenses
- payroll to placing people with disabilities and people who are hired encouraged by the state
Deductible Taxable Income
Venture investment enterprises engaging in venture investment that are encouraged and supported by the state may offset the taxable income at a certain ratio in proportion to capital invested in.
Technology advancement is one of the reasons that accelerated depreciation of fixed assets is necessary, shortening depreciation life or adopting accelerated depreciation method.
Deduction of Taxable Income
The income obtained by enterprises which derived from the products in line with the state’s industrial policies through comprehensive use of resources may be deducted from the taxable income.
Deduction of Payable Tax
- The investment of enterprises on procurement of special facilities for environmental protection, energy and water conservation and safe production may be subject to a deduction of tax at a certain ratio.
- According to the regulations for the implementation of the Transitional Preferential Enterprise Income Tax Policy and the Enterprise Income Tax Law, regular tax reduction and exemption and preferential policies on low tax rate cannot be enjoyed concurrently. Changes would not be allowed once chosen. Qualified enterprises can enjoy such concurrently in accordance with the Enterprise Income Tax Law and the regulations for the implementation of the preferential tax policies.
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