FIEs must pay income tax on income obtained from production, business
operations and other sources. Foreign enterprises without a separate legal presence in mainland China, such as a representative office, have to pay income tax on income from production, business operations and other sources derived from inside mainland China (a cost-plus method
is often used to determine the chargeable income of a representative office).
The enterprise income tax (the “EIT”) rate which is applicable in the majority of cases is 25%, while the foreign investments in the central and western regions of China in areas covered by the Catalogue are entitled to a reduced EIT rate of 15%.
In addition to EIT, foreign investors should be aware that value-added tax is levied on a wide range of industries in mainland China,including insurance, construction, transportation, modern services,postal services, telecommunications, real estate, financial services and consumer services.
Asset sales are subject to VAT while share sales are not. VAT is levied on the transfer price of the inventory or equipment, generally at the rate of 17%. VAT is also levied on the transfer price of intangibleassets such as copyrights, trademarks, patents, knowhow and goodwill, land use rights and building ownership rights. Besides the taxes mentioned above, there are a number of other taxes that may be
imposed on an FIE in relation to specific transactions. Different scenarios may lead to different tax implications and specialist advice should always be sought on the tax implications of a transaction.
If you want know more information about foreign investment, please contact us. phone number:18948304248.
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