Can You Explain the Tax Regime for New Companies in China?

December 29, 2021 | BY

Susan Mok

Guo Yongmao of Haiwen & Partners discusses the various types of taxes under the PRC tax regime that new companies must consider when setting up a business in mainland China and highlights how tax impacts investors of a PRC company if they are foreign entities when considering dividends distribution, interest payment and transfer pricing

Summary

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  • New companies need to consider tax compliance and tax planning matters from the moment they set up their business in mainland China
  • Employees will be subject to individual income tax (IIT), and employers must withhold IIT for the employees
  • Furthermore, if foreign investors invest in the PRC real estate market, among the various taxes, land appreciation tax (LAT) is a very important type of tax for real estate related transactions

New companies need to consider tax compliance and tax planning matters from the moment they set up their business in mainland China and it is necessary to understand the specific types of taxes and related tax rates for such purposes.

Under PRC tax laws and regulations, there are various types of taxes (and governmental fees) that apply to different types of businesses, including enterprise income tax (EIT), value-added tax (VAT), consumption tax, urban maintenance and construction tax (UMCT), education surcharge (ES), local education surcharge (LES), customs duty, deed tax, land use tax, property tax, land appreciation tax (LAT), stamp duty, etc. In addition, employees will be subject to individual income tax (IIT), and employers must withhold IIT for the employees.

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