3. TAXATION IN THE MAINLAND CHINA
3. 2. TAX ADMINISTRATION SYSTEM IN PRC
In PRC, the tax authorities are divided into 2 levels. They include states and local tax bureau and the rates they adopted are also different.
Their orginizational chart can simply be summarized below:
DIFFERENT CATEGORIES OF TAX IN PRC
Recently, there are more than 20 different categories of tax encountered in the daily business matter and daily life in PRC.
Generally speaking, the following taxes below are mostly hit by the most businesspersons who carry on business in PRC.
1. ENTERPRISE INCOME TAX (EIT)
- Subject to Foreign enterprise investment made in PRC (25%);
- Is considered as gross profit X deemed rate X tax rate;
- Subject to income sourced in PRC
2. BUSINESS TAX (BT)
3. VALUE-ADDED TAX (EXPORT AND IMPORT VAT TAX)
- For the service providers who provided the service inside PRC, PRC sourced income is derived from or arise;
- Amount of tax payable is generally equal to 3% to 20% of the gross income;
- It is also applicable to business transactions transfer of immovable / intangible property in PRC;
- Pay 100% of the tax amount to the local government;
- It is not recoverable but is deductible in calcculations of the income tax purpose.
4. INDIVUDAL INCOME TAX
- It is subject to the activities of the selling and purchases of goods, commodities incurred in PRC;
- It is considered on the invoiced amount in the related invoices issued by the eligible issuing units;
- The tax rate is different for the import and export invoices;
- The tax payer can be divided into 2 categories: general tax payer and small scale VAT taxpayer, therefore tax rates applicable to them are different.
We look at the expatriates working in PRC including the HK permanent residents:
- Apply to individual who have a domicile or PE in PRC;
- Calculate the number of days staying in PRC;
- Day of arrivals, date of departure, and within multiple entry within one day; and
- Different treatments for expatriates from different countries which have or have no tax treaty with PRC.
- A chief representative or expatriate working in the PRC for a project is deemed to have a PE in PRC, is excluded from the limitation of 90/ 183 days rule.
- IIT is charged on the rates ranging from 5 to 45%.