Corporate Tax 2010 - BMR Advisors

Hendersen Taxand
China
4 Tax on Business Operations: General
4.1 What is the headline rate of tax on corporate profits
The headline rate of tax on corporate profits is 25%.
4.2 When is that tax generally payable
Enterprises shall file quarterly tax returns for the corporate income
tax and make quarterly estimation payments. The quarterly returns
and estimation payments are due within 15 days after the end of
each quarter, i.e., 15 January, 15 April, 15 July, and 15 October. An
annual tax return, together with financial statements of the
enterprise audited by a local accounting firm, must be filed within
five months after the end of the tax year. The tax already paid in
advance by quarterly instalments could be set off against the annual
tax payment. Meanwhile, any overpayment should be refunded.
4.3 What is the tax base for that tax (profits pursuant to
commercial accounts subject to adjustments; other tax
base)
The tax base follows the accounting profit subject to book-to-tax
adjustments.
4.4 If it otherwise differs from the profit shown in commercial
accounts, what are the main other differences
The differences between book profit and tax profit can be classified
into two types: permanent differences; and timing differences. The
main permanent differences include over-deducted expenses and
non-deductible expenses for tax purpose, interest income from
treasury bonds, deemed income for tax purpose, etc. The main
timing differences include provisions, accrual expenses, preoperation
expenses, depreciation expenses and amortisation
expenses, etc.
properties in the designated cities or areas. RET is levied annually
at the rate of 1.2% on the original value of the property. Generally
local authorities will grant a 10% to 30% discount of the taxable
amount. For leased property, RET is levied annually at the rate of
12% on rental income.
Land Appreciation Tax (“LAT”)
LAT is levied on gains realised from real property transactions at
progressive rates from 30% to 60%, “based on the land value
appreciation amount”, which is the excess of the consideration
received from the transfer of real property over the total deductible
amount.
Deed Tax (“DT”)
DT is levied on the purchase or sale, gift or exchange of ownership
of land use rights or real properties. The transferee/assignee is the
taxpayer. Tax rates range from 3% to 5%.
Resource Tax (“RT”)
RT may be levied on natural resources, generally on a tonnage or
volume basis, at rates specified by the Ministry of Finance in
consultation with relevant ministries of the State Council. The
resources taxed include crude oil, natural gas, coal, other raw nonmetallic
minerals, raw ferrous metals, nonferrous metallic minerals,
and salt (including solid and liquid salt).
Motor Vehicle Acquisition Tax (“MVAT”)
MVAT is imposed on purchasing and importing of the following
types of transport vehicles:
Cars.
Motorcycles.
Trams.
Electric buses.
Carts.
Certain types of trucks.
Manufacture of the above vehicles for own use or receipt of the
above in the form of a gift or lottery, etc., would also be subject to
MVAT. The MVAT rate is fixed at 10% of the taxable
consideration.
China
4.5 Are there any tax grouping rules Do these allow for relief
in your jurisdiction for losses of overseas subsidiaries
No. There is no tax grouping rules in China for Foreign Investment
Companies.
4.6 Is tax imposed at a different rate upon distributed, as
opposed to retained, profits
Retained profit is not subject to PRC tax.
Under the new income tax law, profit distributed to foreign
enterprise is subject to 10% withholding tax.
Under the new income tax law, profit distributed between resident
enterprises shall be exempt from income tax.
4.8 Are there any local taxes not dealt with in answers to
other questions
Vehicle and Vessel Tax (“VVT”)
VVT is levied on Vehicle and Vessel. Certain categories of vehicles
and vessels (e.g. non-powered vehicles and vessels) are exempt
from VVT as listed in the governing regulations. The tax on vessels
is based primarily on tonnage. The provincial authorities are
required to draw up a schedule based on the tax amounts applicable
to different types of vehicles and on their tonnage capacity and
usage.
5 Capital Gains
4.7 What other national taxes (excluding those dealt with in
“Transaction Taxes”, above) are there - e.g. property taxes,
etc.
The other major national taxes include Real Estate Tax, Land
Appreciation Tax, Deed Tax, Resource Tax and Motor Vehicle
Acquisition Tax.
Real Estate Tax (“RET”)
RET is payable by Foreign Investment Enterprises that own
ICLG TO: CORPORATE TAX 2010
© Published and reproduced with kind permission by Global Legal Group Ltd, London
5.1 Is there a special set of rules for taxing capital gains and
losses
For FIEs, Capital gains and losses are taxed the same as business
profits. There is no special set of rules for taxation on capital gains
and losses.
Foreign shareholders (corporate and individual) are taxed on capital
gains from the sale of their investment in China FIEs at a 10%
withholding tax rate, with further tax treaty relief available.
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