Overview of tax system in China
The tax system in China can be classified by the following types.
- Circulation tax
- income tax
- resource tax
- special purpose tax
- Assets tax
- action tax
- agriculture tax
- trail tax
Based on the classifications of national tax, council tax and common tax, the followings are the main tax items in China.
- National tax:
Trail tax; consumption tax and value added tax agent by customs; consumption tax; business income tax of local banks, foreign-affiliated banks and non banks; business income tax of railway corporations, banks and insurance banks.
- Council tax:
Personal income tax; sales tax; city maintenance and construction tax; fixed assets investment adjusted tax; city land use tax; shipping use tax; stamp tax; contract tax; land value added tax; land possess tax
- Common tax: value added tax; resource tax; business income tax.
According to the classification of direct tax and indirect tax, the taxes and tax rates are as follows.
- Business income tax: 28%
- Sales tax: 17%
- Demotic consumption tax: 8%
- Import and export value added tax, overseas consumption tax: 5%
- Business income tax: 21%
- Personal income tax: 6%
- City maintenance and construction tax: 2%
- Land possess tax: 2%
- Land value added tax: 3%
- Contract tax: 3%
- Trail tax: 3%
- Other tax: 2%
Characteristics of tax system:
・ Closing the books for all corporations: December
・ Tax declaration every mouth and closing books conducted every mouth
・ Personal Income Tax declaration conducted every mouth
・ The deduction of personal income tax conducted only for basic part
・ Important for receipts
There are special tax risks in China and the following risks should be paid attention to.
Taxpayers in China must declare tax truly before the deadline. Otherwise, there are different kinds of punishment.
- Responsibility to show evidence
Taxpayers must verify the justice of the declaration. And in order to verify the justice, the materials are necessary. For example, after the amending of tax declaration, if it is still judged as a mistake and there is no material to verify the justice of it, the corporation has to pay the penalty.
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