China Corporate Income Tax Explained
Corporate Tax Reporting – the monthly, quarterly and annual compliance requirements. In China, upon obtaining a business license and completing tax registration, companies are required to meet the monthly, quarterly and annual compliance requirements. Which include, for instance, Corporate Income Tax (CIT), Value Added Tax (VAT) with relevant Surtax, Individual Income Tax (IIT), Housing Fund and Social Security.
Before the 15th of each month, companies registered in China will typically perform the tax filing for the previous month (which is the process of entering the tax record into the official public system). If the reporting date falls into a weekend or public holiday, it will automatically get extended until business resumes. All tax filing information is to be used in the annual report of the firm.
Housing Fund contributions are due at the end of each month. While Social Security is to be paid before the 10th each month. In addition, and most importantly, the following taxes need each to be filed at a monthly, quarterly and annual basis:
Corporate Income Tax:
- 25% for enterprises with taxable profit higher than CNY 3 million.
- 10% for SMEs with taxable profit between CNY 1-3 million.
- 5% for SMEs with taxable profit less than CNY 1 million.
- SPECIALLY IN THE YEAR of 2021 a reduced tax rate of 2,5% will be applied to SME’s with taxable profit lower than CNY 1 million.
Value Added Tax:
- General goods: 13%
- Services (with a few exceptions categories): 6%
- Agricultural products and specific goods: 9%
- Small Scale Taxpayer (放置链接): 3% (preferential tax reduction to 1% in 2020)
Surtax (6% – 13% on top of VAT)
Individual Income Tax (3% – 45% depending on the salary)
Submitting the annual audit report to the State Administration of Taxation (SAT) is now on voluntary basis, a policy once mandatory for all Foreign Invested Enterprises (FIE). The due date of annual audit report and China Corporate Tax Reporting is around Feb/March. CIT filing, as well as the annual publication report, should be completed during March to June of the following year according to the Chinese State Taxation Administration Bureau.
|Reporting Frequency||Taxation Category|
|Monthly Filing |
Due on 15th of the following month
|Quarterly Filing |
Due on 15th of the following quarter
|Annual Filing |
Due around April/May of the following year
| Annual CIT filing |
(Mainly as adjustments on provisional CIT filing)
Similarly, another annual corporate compliance requirement is the Annual Inspection. This is related to the licenses inspection/verification process (relevant to the business operation, including business license) conducted by compliance authority officers. Moreover, proper tax filing and Annual Inspection are the bare minimum compliance obligation of all FIEs.
In conclusion, penalties will be imposed to companies that fail to comply with the regulations of China Corporate Tax Reporting. FIEs must keep track of their tax reporting duty and perform the relevant filing on time. Or seek assistance from a trusted third-party to manage the reporting on their behalf. Essential Cloud Accountants have assisted over 300+ clients from five continents with market entry, taxation and accounting matters for their Chinese operations. Should you have any questions or would like to have a chat with us regarding your business, please contact us at firstname.lastname@example.org.