I. Enterprise income tax
The enterprise income tax rate for foreign enterprises and its production and operation organizations in China is 30%.
The enterprise income tax rate for the productive enterprises with foreign investment in the development zone is 24%.
As for productive enterprises with foreign investment of a term of more than 10 years, the business income tax will be exempted in the first two profit-making years and reduced by half in the ensuing three years. Projects belonging to the resources exploitation of fuel, natural gas, rare and precious metals should be incompliance with the State Council regulations.
Technologically advanced enterprises can be extended for another three years the payment of enterprise income tax at the rate reduced by 50 percent. For the technological advanced productive enterprises with foreign investment of a term of more than 10 years, the business income tax will be exempted in the first two profit-making years and reduced by half in the ensuing three years.
The foreign-invested export orientated enterprises, after the expiration of the period of reduction or exemption of enterprise income tax in accordance with the above article 1, may pay the tax at 50% rate in current year if the export value amounts to 70% or more of their total revenue in the year. An export enterprise, meeting the preceding conditions, if has paid an enterprise income tax rate of 15%, shall pay enterprise income tax at a rate of 10%.
II. Local income tax
The local income tax rate is 3%.
The enterprise income tax rate of any productive enterprise with foreign investment in technology and/or knowledge intensive project or over $30 million long-term project, or project engaged in infrastructure construction such as energy and transportation, or harbor construction, upon approval is reduced to 15% and their local income tax will be exempted.
The foreign investment in the following projects will be exempted of the local income tax:
Machine manufacturing, electronics industry, metallurgy, chemical industry, construction materials, light industry, textile, packing industry, medical appliance, pharmaceutical industry, agriculture, forestry, herding and breeding and the related processing industry, civil engineering.
III. Refund of Tax for Reinvestment
Forty percent of enterprise income tax already paid on the reinvested portion shall be refunded to foreign investors, who reinvest the profits distributed to them by their enterprises in order to add registered capital, or establish other foreign-invested enterprises with an operation period of no less than five years after application and approval by the taxation authorities.
The total amount of enterprise income tax already paid on the reinvested portion shall be refunded to foreign investors, who reinvest the profits distributed to them by their enterprises in order to establish export enterprises or technologically advanced enterprises for an operation period of no less than five years after application and approval by the taxation authorities. If the investment is withdrawn after an operation period of no more than 5 years, the refunded enterprises income should be repaid.
IV. Tax on Profit Remittance
After-tax profits from the export enterprises or hi-tech enterprises remitted abroad by foreign investors will be exempt form income tax.
V. Individual income tax
Individual income tax shall be levied in accordance with the provisions of this Law by individuals who have domicile in China, or though without domicile but have resided for one year or more in China on their income derived from sources within and outside China. Individuals who are neither domiciled nor resident in China, or who are not domiciled and reside for less than one year in China, shall pay individual income tax on income derived form sources within China.
For individuals without domicile in China, if living in China for less than 90 day in one tax year, their income earned in China, if paid by their employer abroad and not coming from the organizations or enterprises in the country, should be exempted from the individual income tax.
Schedule 1 of individual income tax rates
(Applicable to income from wages and salaries)
Grade Monthly Taxable Income Tax Rate(%)
1 Income of 500 yuan or less 5
2 That part of income in excess of 500 to 2000 yuan 10
3 That part of income in excess of 2000 to 5000 yuan 15
4 That part of income in excess of 5000 to 20000 yuan 20
5 That part of income in excess of 20000 to 40000 yuan 25
6 That part of income in excess of 40000 to 60000 yuan 30
7 That part of income in excess of 60000 to 80000 yuan 35
8 That part of income in excess of 80000 to 100000 yuan 40
9 That part of income in excess of 100000 yuan 45
(Note: "Monthly taxable income" mentioned in this schedule refers to the amount remaining from the gross income in a month after the deduction of 800 yuan or the additional deduction for the additional deduction for expenses.)
Schedule 2 of individual income tax rates
(Applicable to income from production or business operation derived by industrial and commercial house-holds and income from contracted or leased operation of enterprises and institutions)
Grade Annual Taxable Income Tax Rates(%)
1 Income of 500 yuan or less 5
2 That part of income in exces of 5000 to 10000 yuan 10
3 That part of income in excess of 10000 to 30000 yuan 20
4 That part of income in excess of 30000 to 50000 yuan 30
5 That part of income in excess of 50000 yuan 35
(Note: "Annual taxable income" mentioned in this schedule refers to the amount remaining from the gross income in a tax year after the costs, expenses and losses have been deducted .)
VI. Goods for export
Unless specified by the state, the goods produced and directly exported by enterprise with foreign investment are exempt from value-added tax and consumption tax. The raw materials, fuel, parts and components, auxiliary materials and packaging materials needed for carrying out the product export contract can enjoy bonded preferential treatment, and on the exporting of the processed products, the customs will end the case.
VII. Equipments imported
From Jan. 1st, 1998, equipment imported by the foreign investment project encouraged by the state shall be exempt from the import customs duties and import link duties within the specified range.
VIII. Time limit for land use
The maximum term with respect to the assigned right to the use of the land shall be determined respectively in the light of the purposes listed below: 70 years for residential purposes; 50 years for industrial purposes; 50 years for the purposes of education, science, culture, public health and physical education; 40 years for commercial, tourist and recreational purposes; and 50 years for comprehensive utilization or other purposes.
IX. Price for assigning land-use right
Favorable price for assigning land usage right can be arranged with a 20%-30% discount.