4. Business Tax

Business tax is a kind of turnover tax levied on the revenue generated from the provision of taxable services, such as communications and transportation, construction, finance and insurance, posts and telecommunications, culture and sports, entertainment and other taxable services, as well as the transfer of intangible assets and the sale of immovable properties within the territory of China.

(a) Taxpayer

Payers of business tax are enterprises or individuals engaged in the provision of taxable services, transfer of intangible assets or sale of immovable properties in China.

(b) Taxable Items and Tax Rates

There are nine taxable items for business tax, ranging from 3% (for communications and transportation) to 20% (for entertainment).

(c) Method of Computation
The formula for computing business tax is as follows:
Tax payable = business turnover * applicable tax rate

(d) Tax Liability and Payment Period

The business tax liability arises on the day the taxpayer receives the full amount of business proceeds or obtains a payment voucher for the proceeds. The payment period may be five days, ten days, fifteen days or one month, to be determined by the competent tax authorities.

5. Income Tax on FIEs and Foreign Enterprises

(a) Object of Taxation

Foreign-invested enterprises (FIEs) and foreign enterprises have to pay income tax on their income derived from production, business operations and other sources within the territory of China.

As Chinese "residents", FIEs are required to bear full tax liabilities and pay income tax on all incomes derived from sources inside and outside China. However, foreign enterprises, which are not Chinese "residents", will only bear limited tax liabilities and pay income tax on incomes derive from sources inside China.

(b) Taxpayer

* FIEs established in China include Sino-foreign equity joint-venture enterprises, Sino-foreign contractual joint-venture enterprises and wholly foreign-owned enterprises.

* Foreign enterprises refer to foreign companies, enterprises and other economic organisations with establishments or venues engaged in production or business operations within China, as well as those which, though without establishments or venues in China, have incomes from sources within the territory of China.

(c) Taxable Items and Tax Rates

* FIEs and foreign enterprises that have establishments or venues in China have to pay corporate income tax of 30% and local income tax of 3% on their incomes from production and business operations and on profits (dividends), interest, rentals, royalties and other incomes derived from sources both inside and outside China that are effectively connected with such establishments or venues.

* Foreign enterprises that have no establishment or venue in China but derive profits, interest, rentals, royalties and other incomes from sources in China, or although they have establishments or venues in China the said incomes are not effectively connected with such establishments or venues, have to pay income tax of 10% on such incomes.

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