How to File Corporate Income Tax in China in 2023?

Cor­po­rate income tax (CIT) is a tax levied on the prof­its of enter­pris­es and oth­er orga­ni­za­tions that are estab­lished in Chi­na or have their effec­tive man­age­ment in Chi­na. CIT is one of the main tax­es that for­eign investors and busi­ness­peo­ple need to pay when they set up and run com­pa­nies in Chi­na. CIT is also sub­ject to fre­quent changes and adjust­ments, as Chi­na’s tax sys­tem evolves and reforms to adapt to the chang­ing eco­nom­ic and social environment.

If you are a for­eign investor or busi­nessper­son who owns or oper­ates a com­pa­ny in Chi­na, you need to be aware of how to file cor­po­rate income tax in Chi­na in 2023 accord­ing to the lat­est laws and reg­u­la­tions. In this arti­cle, we will explain what are the main fea­tures and rules of cor­po­rate income tax in Chi­na, what are the main steps and pro­ce­dures you need to fol­low to file cor­po­rate income tax in Chi­na, and what are the main ben­e­fits and incen­tives you can enjoy by fil­ing cor­po­rate income tax in China.

What are the main features and rules of corporate income tax in China?

Accord­ing to Chi­na’s Cor­po­rate Income Tax Law and its imple­men­ta­tion reg­u­la­tions, which were revised and amend­ed in 2018 and 2019 respec­tive­ly, the main fea­tures and rules of cor­po­rate income tax in Chi­na are as follows:

• Tax­pay­ers: The tax­pay­ers of cor­po­rate income tax in Chi­na are enter­pris­es and oth­er orga­ni­za­tions that have income from pro­duc­tion, busi­ness oper­a­tions, or oth­er sources. There are two types of tax­pay­ers: res­i­dent enter­pris­es and non-res­i­dent enter­pris­es. Res­i­dent enter­pris­es are those that are estab­lished in Chi­na or have their effec­tive man­age­ment in Chi­na. Non-res­i­dent enter­pris­es are those that are not estab­lished in Chi­na or do not have their effec­tive man­age­ment in Chi­na, but have estab­lish­ments or places in Chi­na that gen­er­ate income, or have income from sources with­in Chi­na with­out any estab­lish­ments or places in China.
• Tax base: The tax base of cor­po­rate income tax in Chi­na is the tax­able income of tax­pay­ers. Tax­able income is cal­cu­lat­ed by deduct­ing non-tax­able income, tax-exempt income, var­i­ous expens­es, loss­es, allowances, etc. from the total income of tax­pay­ers. Total income includes income from pro­duc­tion, busi­ness oper­a­tions, equi­ty invest­ments, asset trans­fers, leas­ing prop­er­ty rights, inter­est, div­i­dends, roy­al­ties, dona­tions, sub­si­dies, etc.
• Tax rate: The stan­dard tax rate of cor­po­rate income tax in Chi­na is 25%. How­ev­er, there are dif­fer­ent pref­er­en­tial tax rates for dif­fer­ent types of tax­pay­ers or indus­tries. For exam­ple, small low-prof­it enter­pris­es can enjoy a reduced tax rate of 20%, while high-tech enter­pris­es that meet cer­tain cri­te­ria can enjoy a reduced tax rate of 15%. There are also spe­cial tax rates for non-res­i­dent enter­pris­es that have income from sources with­in Chi­na with­out any estab­lish­ments or places in Chi­na. For exam­ple, the with­hold­ing tax rate for div­i­dends is 10%, while the with­hold­ing tax rate for roy­al­ties is 20%.
• Tax year: The tax year of cor­po­rate income tax in Chi­na is gen­er­al­ly the same as the cal­en­dar year, i.e., from Jan­u­ary 1^st to Decem­ber 31^st. How­ev­er, tax­pay­ers can apply for a dif­fer­ent tax year with the approval of the com­pe­tent tax author­i­ties if they have spe­cial reasons.
• Tax dec­la­ra­tion: The tax­pay­ers of cor­po­rate income tax in Chi­na need to declare and pay cor­po­rate income tax on a quar­ter­ly basis and an annu­al basis. The quar­ter­ly dec­la­ra­tion should be made with­in 15 days after the end of each quar­ter. The annu­al dec­la­ra­tion should be made with­in five months after the end of each year. The tax­pay­ers need to sub­mit var­i­ous forms and doc­u­ments to sup­port their dec­la­ra­tion, such as finan­cial state­ments, account­ing vouch­ers, invoic­es, con­tracts, etc.

The above fea­tures and rules are sub­ject to change and adjust­ment accord­ing to the lat­est poli­cies and reg­u­la­tions issued by the com­pe­tent author­i­ties. There­fore, it is impor­tant for for­eign investors and busi­ness­peo­ple to keep abreast of the lat­est devel­op­ments and updates on cor­po­rate income tax in China.

What are the main steps and procedures to file corporate income tax in China?

Accord­ing to Chi­na’s Cor­po­rate Income Tax Law and its imple­men­ta­tion reg­u­la­tions, as well as oth­er rel­e­vant rules and guide­lines issued by the com­pe­tent author­i­ties, the main steps and pro­ce­dures to file cor­po­rate income tax in Chi­na are as follows:

1. Reg­is­ter as a tax­pay­er. The first step to file cor­po­rate income tax in Chi­na is to reg­is­ter as a tax­pay­er with the com­pe­tent tax author­i­ties. This can be done either by apply­ing online through the Nation­al Tax Ser­vice Plat­form (http://​www​.chi​natax​.gov​.cn/) or by vis­it­ing the local tax bureau in per­son. The tax­pay­ers need to pro­vide var­i­ous infor­ma­tion and doc­u­ments to com­plete the reg­is­tra­tion, such as busi­ness license, legal rep­re­sen­ta­tive’s ID card, bank account, con­tact infor­ma­tion, etc. The tax­pay­ers will receive a tax­pay­er iden­ti­fi­ca­tion num­ber (TIN) and a tax reg­is­tra­tion cer­tifi­cate after the reg­is­tra­tion is approved.
2. Keep account­ing records and issue invoic­es. The sec­ond step to file cor­po­rate income tax in Chi­na is to keep account­ing records and issue invoic­es accord­ing to the rel­e­vant account­ing and invoic­ing stan­dards and rules. The tax­pay­ers need to adopt the accru­al basis of account­ing and use the Chi­nese cur­ren­cy (RMB) as the func­tion­al cur­ren­cy. The tax­pay­ers also need to issue spe­cial VAT invoic­es or gen­er­al VAT invoic­es for their sales of goods or ser­vices, and obtain spe­cial VAT invoic­es or gen­er­al VAT invoic­es for their pur­chas­es of goods or ser­vices. The tax­pay­ers need to keep their account­ing records and invoic­es for at least 10 years for tax inspec­tion purposes.
3. Cal­cu­late tax­able income and tax payable. The third step to file cor­po­rate income tax in Chi­na is to cal­cu­late tax­able income and tax payable accord­ing to the rel­e­vant tax laws and reg­u­la­tions. The tax­pay­ers need to deter­mine their total income, non-tax­able income, tax-exempt income, var­i­ous expens­es, loss­es, allowances, etc., and deduct them from their total income to obtain their tax­able income. The tax­pay­ers also need to apply the applic­a­ble tax rate and any pref­er­en­tial poli­cies or incen­tives to their tax­able income to cal­cu­late their tax payable.
4. Declare and pay cor­po­rate income tax. The fourth step to file cor­po­rate income tax in Chi­na is to declare and pay cor­po­rate income tax on a quar­ter­ly basis and an annu­al basis. The tax­pay­ers need to fill in var­i­ous forms and sub­mit them online through the Nation­al Tax Ser­vice Plat­form or offline through the local tax bureau with­in the pre­scribed time lim­it. The tax­pay­ers also need to attach var­i­ous doc­u­ments and mate­ri­als to sup­port their dec­la­ra­tion, such as finan­cial state­ments, account­ing vouch­ers, invoic­es, con­tracts, etc. The tax­pay­ers need to pay their cor­po­rate income tax with­in the pre­scribed time lim­it through online bank­ing or offline banking.
5. Han­dle tax-relat­ed mat­ters. The fifth step to file cor­po­rate income tax in Chi­na is to han­dle any tax-relat­ed mat­ters that may arise dur­ing or after the dec­la­ra­tion and pay­ment process. For exam­ple, the tax­pay­ers may need to adjust their dec­la­ra­tion or pay­ment due to errors or changes in their income or expens­es, apply for tax refunds or exemp­tions due to over­pay­ment or spe­cial cir­cum­stances, deal with tax audits or inspec­tions con­duct­ed by the com­pe­tent tax author­i­ties, resolve any tax dis­putes or con­tro­ver­sies that may occur, etc.

The above steps and pro­ce­dures are sub­ject to change and adjust­ment accord­ing to the lat­est poli­cies and reg­u­la­tions issued by the com­pe­tent author­i­ties. There­fore, it is impor­tant for for­eign investors and busi­ness­peo­ple to con­sult with pro­fes­sion­al tax advi­sors or agents who can help them with fil­ing cor­po­rate income tax in China.

What are the main benefits and incentives of filing corporate income tax in China?

Fil­ing cor­po­rate income tax in Chi­na not only ful­fills the legal oblig­a­tions of for­eign investors and busi­ness­peo­ple who own or oper­ate com­pa­nies in Chi­na, but also brings some ben­e­fits and incen­tives for them. Here are some of them:

• Reduc­ing tax bur­den and increas­ing prof­itabil­i­ty. Fil­ing cor­po­rate income tax in Chi­na can help for­eign investors and busi­ness­peo­ple reduce their tax bur­den and increase their prof­itabil­i­ty by tak­ing advan­tage of var­i­ous pref­er­en­tial poli­cies and incen­tives offered by the Chi­nese gov­ern­ment. For exam­ple, for­eign investors and busi­ness­peo­ple can enjoy low­er tax rates, exemp­tions, deduc­tions, cred­its, refunds, etc., for cer­tain types of tax­pay­ers or indus­tries that are encour­aged or sup­port­ed by the gov­ern­ment. For­eign investors and busi­ness­peo­ple can also ben­e­fit from var­i­ous tax treaties or agree­ments that Chi­na has signed with oth­er coun­tries or regions to avoid dou­ble tax­a­tion or reduce with­hold­ing taxes.
• Improv­ing com­pli­ance and rep­u­ta­tion. Fil­ing cor­po­rate income tax in Chi­na can help for­eign investors and busi­ness­peo­ple improve their com­pli­ance and rep­u­ta­tion by fol­low­ing the rel­e­vant laws and reg­u­la­tions and ful­fill­ing their social respon­si­bil­i­ties. For exam­ple, for­eign investors and busi­ness­peo­ple can avoid penal­ties such as fines, con­fis­ca­tion of ille­gal gains, sus­pen­sion of busi­ness activ­i­ties, revo­ca­tion of busi­ness licens­es, or even crim­i­nal lia­bil­i­ty that may result from non-com­pli­ance or eva­sion of cor­po­rate income tax in Chi­na. For­eign investors and busi­ness­peo­ple can also enhance their image and cred­i­bil­i­ty among their cus­tomers, part­ners, sup­pli­ers, employ­ees, reg­u­la­tors, etc., by demon­strat­ing their hon­esty and integri­ty in pay­ing their fair share of tax­es in China.
• Expand­ing busi­ness oppor­tu­ni­ties and growth poten­tial. Fil­ing cor­po­rate income tax in Chi­na can help for­eign investors and busi­ness­peo­ple expand their busi­ness oppor­tu­ni­ties and growth poten­tial by access­ing more resources and sup­port from the Chi­nese gov­ern­ment and mar­ket. For exam­ple, for­eign investors and busi­ness­peo­ple can enjoy more mar­ket access and fair com­pe­ti­tion by reg­is­ter­ing as e‑commerce oper­a­tors in Chi­na and obtain­ing a busi­ness license. For­eign investors and busi­ness­peo­ple can also lever­age more pol­i­cy sup­port and incen­tives by par­tic­i­pat­ing in Chi­na’s Belt and Road Ini­tia­tive or inno­vat­ing with Chi­na’s sci­ence and tech­nol­o­gy tal­ent pool. For­eign investors and busi­ness­peo­ple can also tap into more con­sumer demand and sat­is­fac­tion by com­ply­ing with prod­uct qual­i­ty and safe­ty stan­dards and pro­tect­ing per­son­al infor­ma­tion and con­sumer rights.

In con­clu­sion, fil­ing cor­po­rate income tax in Chi­na is a cru­cial and ben­e­fi­cial process for for­eign investors and busi­ness­peo­ple who own or oper­ate com­pa­nies in Chi­na. For­eign investors and busi­ness­peo­ple need to be aware of the main fea­tures and rules of cor­po­rate income tax in Chi­na, the main steps and pro­ce­dures to file cor­po­rate income tax in Chi­na, and the main ben­e­fits and incen­tives of fil­ing cor­po­rate income tax in Chi­na. By com­ply­ing with the law and adapt­ing to the chang­ing mar­ket envi­ron­ment, for­eign investors and busi­ness­peo­ple can achieve suc­cess and sus­tain­abil­i­ty in China.

Frequently Asked Questions

Sources:

1. The State Coun­cil of Chi­na | E‑Commerce Law of the Peo­ple’s Repub­lic of China
2. The State Tax­a­tion Admin­is­tra­tion of Chi­na | Announce­ment on Mat­ters Con­cern­ing Val­ue-Added Tax Poli­cies for Cross-Bor­der E‑Commerce Retail Imports
3. The State Tax­a­tion Admin­is­tra­tion of Chi­na | Announce­ment on Mat­ters Con­cern­ing Cor­po­rate Income Tax Poli­cies for Cross-Bor­der E‑Commerce Retail Imports
4. The State Tax­a­tion Admin­is­tra­tion of Chi­na | Announce­ment on Mat­ters Con­cern­ing Con­sump­tion Tax Poli­cies for Cross-Bor­der E‑Commerce Retail Imports
5. The State Tax­a­tion Admin­is­tra­tion of Chi­na | Announce­ment on Mat­ters Con­cern­ing Cus­toms Duties Poli­cies for Cross-Bor­der E‑Commerce Retail Imports