Corporate Tax 2010 - BMR Advisors

Chapter 8
China
Dennis Xu
Hendersen Taxand
Eddie Wang
1 General: Treaties
1.1 How many income tax treaties are currently in force in
your jurisdiction
As of September 30, 2009, Mainland China has signed 90 tax
treaties with 90 countries and 2 arrangements with 2 Special
Administrative Regions.
(0.1%); loan (0.005%); property insurance (0.1%); and
technology contracts (0.03%);
2) documents for transferring the title of property (0.05%);
3) accounting books (0.05% for capital book and RMB5 per
book for others);
4) certificates or licences (RMB5 per certificate/licence); and
5) other documents which the Ministry of Finance determines
to be dutiable.
1.2 Do they generally follow the OECD or another model
They generally follow the OECD model and UN model.
1.3 Do treaties have to be incorporated into domestic law
before they take effect
No, treaties do not have to be incorporated into domestic law before
they take effect.
1.4 Do they generally incorporate anti-treaty shopping rules (or
“limitation of benefits” articles)
No, they do not generally incorporate anti-treaty shopping rules.
1.5 Are treaties overridden by any rules of domestic law
(whether existing when the treaty takes effect or
introduced subsequently)
No, the treaties are not overridden by any rules of domestic law.
2 Transaction Taxes
2.2 Do you have Value Added Tax (or a similar tax) If so, at
what rate or rates
China has enacted Value Added Tax (“VAT”) rules since the early
1980s. The latest revision on the VAT rules took place in 2008
which subsequently effective from January 1st, 2009. In China,
VAT is a turnover tax levied on all businesses engaged in the sale of
goods, provision of processing, repair or replacement services
within China, or importation of goods.
The applicable VAT rate varies according to different types of
taxpayers and different goods.
The basic VAT rate is 17%.
A reduced VAT rate of 13% is applicable for the sales and
importation of some specific goods (e.g. crop, water, gas,
books, newspapers, magazines, etc.).
The 3% collection rates are applicable for all goods sold by
small scale VAT taxpayers engaged in manufacturing and
trading. The 6%, 4% or 3% rate are applicable to some
specific goods sold by general VAT taxpayers. Under such
mechanism, VAT is calculated on sales income while no
input credit is available.
Exports are generally zero rated, but there is not a full zero
rated system. China adopts different VAT refund rates for
different types of products.
2.1 Are there any documentary taxes in your jurisdiction
Stamp Duty (“SD”) is a documentary tax levied on specific
categories of documents executed in China at different rates. SD is
payable by all the contracting parties based on the contract value.
The categories of dutiable documents are outlined as below:
1) contracts or documents in the nature of a contract with regard
to: purchases and sales (SD rate is 0.03%); the undertaking
of processing (0.05%); engineering project reconnaissance
and designing (0.05%); contracting for construction and
installation projects (0.03%); property leasing (0.1%);
commodity transport (0.05%); warehousing or custody
2.3 Is VAT (or any similar tax) charged on all transactions or
are there any relevant exclusions
Business Tax (“BT”)
In China, BT is another type of turnover tax. BT and VAT are
mutually exclusive. BT applies to the provision of services
(excluding the VATable services, i.e. processing services, repair and
maintenance services), the transfer of intangible assets and the sale
of real estate properties in China.
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