China: La fiscalidad

Tax Rate For Foreign Companies

Same taxes as for chinese companies.

Capital Gains Taxation

Tax on capital gains (20% rate) for a Chinese company is added to the regular tax.
Tax on capital gains on the sale of real estate (20%) is calculated as sale price - purchase price.
When capital gain is above 50% of the purchase price, the income tax rate on capital gain ranges between 30% and 60%. (60% when the capital gain is more than 200%).

Main Allowable Deductions and Tax Credit

The following expenditure is deductible under certain conditions:
-  Deduction of losses (deductible over 5 years)
-  Consolidated financial statements
-  Bad debts up to a limit of 3% of the granted loans (Chinese foreign companies in the financial sector) . 
-  Financial expenditure for income generation (except shareholder loans as per limit legally defined in China). 
-  Transactions between the associated parties
-  The method of depreciation is linear; however, a foreign company can make a request to Chinese tax authorities for an accelerated rate of depreciation.

Other Corporate Taxes

- tax on transactions (turnover tax): Value Added Tax (17%, 13% for certain products), consumption tax (3 to 50%), commercial tax (3 to 20%).
- environmental tax on natural resources
- land taxes: urban property tax (1.2% of the original value or 12% on the rental value)
- taxes generally paid in advance on vehicles and ships
- 10% of the taxable consideration on the purchase and import of cars, motor bikes, trams, electrical buses, carriages and certain types of stamp duty on trucks
- Stamp duty: between 0.005% to 0.1%
- Contract tax, on the assignees or the assignees of the ownership of the right of use of the land or the real estate will be taxed from 3% to 5%
- Education Tax (3%)
- Urban Construction and Maintenance Tax. The rates are 1% for low populated areas, 5% in country areas and 7% in big cities.

Country Comparison For Corporate Taxation

Allowable Deductions and Tax Credit

- credit for donations up to 30% of the income.
- income of personnel services (deduction of CNY 800 or 20%). 
- current expenditure for rental income, up to CNY 800 for each simple expenditure.
- relief for an individual who suffered a natural disaster.
- relief for handicapped person, widows/widowed person and orphans.

Special Expatriate Tax Regime

For foreigners taxed in China, an additional amount of 3,200 RMB can be reduced from their monthly income, or a total of 4,000 RMB.

Capital Tax Rate

A fixed income tax rate of 20% will be applicable to income from fees, earnings, dividends, bonuses, lease income or on the transfer of property, accidental income and other products. The interests on savings account deposits, government bonds and financial bonds issued by the State will be free of income tax.

Accounting System

Accounting Standards

The accountancy standards for companies promulgated by the Ministry of Finances (MOF) of 30 November 1992 and which came into effect on July 1, 1993. China promulgated its first complete standards specific to accountancy in 1997 and the MOF promulgated 13 standards more specific to accountancy since then. For more information, consult Chinaorbit.

Accounting Regulation Bodies

Ministry of Finance (in chinese)
CASC, Chinese committee of accounting standards
CICPA, Chinese institute of chartered accountants

Accounting Law

Initially promulgated in 1985, the accounting law of December 1993 was updated in 1999. It includes the legal standards governing accountancy and forms the base for the formulation of administrative rules and regulations for accounting.

Difference Between National and International Standards (IAS/IFRS)

There is a gap between national and international accounting standards IAS/IFRS. China does not follow international accounting practices and directives, although the reforms are being done in this direction. Indeed, accounting standards similar to IFRS are currentlently mandatory for publicly held companies listed in China and foreign-invested banks). Otherwise, several accounting regulations are similar to the international practice, however there are differences.

Accounting News

China Accounting News (EIN)

Accounting Practices

Tax Year

The financial year begins on January 1st and finishes on December 31st of the same year.

Accounting Reports

Audit report normally contains a paragraph of definition of the 'task' or `scope' and a paragraph of opinion. The paragraph of opinion aims at establishing if the accounts were prepared according to the appropriate rules and regulations. All the reservations in opinion must be elaborated above. Statements of financial accounts or reports should comprise a Balance Sheet, profit and loss accounts, a report of gross margin of self-financing, notes on the accounts and an account for appropriation of profits and losses. For more information consult the website of the China Accounting Standards Committee operating under the Ministry of Finance.

Publication Requirements

Annual publication.

Accountancy Profession

Accountants

A fundamental conceptual difference exists between the West and China for auditors. In the West, the auditors are supposed to report to the shareholders, the results and possible mistakes of the company at the general body meeting. In China, the auditors are responsible to work for the management and purely help them in legal formalities.

Professional Accountancy Bodies

CICPA, Website of the Chinese institute of chartered accountants (in English)

Member of the International Federation of Accountants (IFAC)

Yes

Member of Other Federation of Accountants

Member of the Confederation of Asian and Pacific Accountants (CAPA) which represents national accountancy organisation in the Asia-Pacific region.

Audit Bodies

Companies have to seek a statutory auditor to conduct an annual audit of the financial health of their organization. You can contact the National Audit Office of China (CNAO).