When it comes to China’s Business Taxes, it can get very confusing between various rates and deadlines. The two main taxes to consider for a Wholly Foreign Owned Enterprise (WFOE) in China are Corporate Income Tax (CIT) and Value-Added Tax (VAT).
CIT is filed and pre-paid (yes, you need to pay in advance) on a quarterly basis on company’s assumed profit. This is followed up by a so-called annual clearance taking place the following year (before May) in order to assess whether the company needs to pay supplementary tax or apply for a reimbursement.
VAT is paid on a quarterly or monthly basis for each transaction and would largely depend on the status and revenue level of the WFOE.
Besides CIT and VAT, there are also some smaller taxes including urban construction and maintenance tax, education surcharge and local education surcharge to be applied on top of VAT, consumption tax paid monthly or quarterly, stamp duty, customs duty, land appreciation tax, resources tax, property tax, vehicle and vessel tax and environmental protection tax.
Do remember, WFOEs also need to withhold Individual Income Taxes (IIT) on behalf of its staff on a monthly basis.
Every month, we will feature a Q&A with Dezan Shira & Associates. Please send us your business-related questions to email@example.com and keep an eye out for an answer in this space!