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VAT in China

Updated on Tuesday 28th January 2020

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1984 is the year the VAT was introduced in China. The standard Value Added Tax in China is set at 13% rate since April 2019 and it is imposed on a series of products and services offered on the market. There are also other types of VAT rates imposed on particular types of services and goods, but for information about what taxes you need to consider when opening a company in China, we suggest you talk to one of our company formation specialists in China. Our advisors can help foreign investors open companies in this country by guiding them throughout the entire procedure.
 

What is the VAT rate in China?

 
The standard VAT rate in China is set at 13% and it is applied to the sales of products and services in this country, and also on the import of goods. Additionally, a low VAT rate of 10% is applicable for the important food categories (agriculture products, dairy, cereals, meat, fruits vegetables), for newspapers and magazines, water supply, heating. It is good to know that a VAT rate of 9% is imposed on accommodations, real estate and construction, restaurants, communication, logistics, and transportation in China.
 

What are other VAT rates imposed in China?

 
The VAT system in China has been revised in 2018 and then applied in 2019, and the State Administration of Taxation wanted to simplify the legislation in this sense. The following table contains other goods and services for which the VAT needs to be paid:
 
 
PRODUCTS/SERVICES VAT RATE
Financial services, insurance 6%
City maintenance 6%
Chinese National Education 3%
Construction Services 3%
Local education 2%
 
For a proper understanding of the VAT rates imposed in China at the time of company incorporation in China, we recommend you address your inquiries to our Chinese company formation agents.
 

Taxpayers in China

 
Companies with activities in China are considered taxpayers, and according to the tax structure in this state, there are two main categories of businesses which must apply for the general taxpayer status, such as:
 
  • general taxpayers with incomes ranging between USD 500,000 and 5 million;
  • small-scale taxpayers with incomes below USD 500,000. 
 
It is good to know that there are also VAT exemptions for the export of goods, meaning that companies with operations in this area will not pay such tax.
 

Who needs to register for VAT in China?

 
Small entrepreneurs and companies in China need to register for VAT. Particular exports of goods from China, reprocessed products in China, the import of products in China and installations in China are subject to the value added tax. Companies dealing with the sale of goods and services in China must be registered for taxation, including for VAT. It is important to know that non-traders with activities in China cannot register for VAT as non-resident traders like it’s the case of European countries. This means that a legal representative with residency in China needs to be appointed in order to register for such a tax and to report the accounting obligations. A Wholly Foreign-Owned Enterprise is recommended for international investors in China, with the mention that registering for VAT will be possible. If you would like to open a company in China and to register for VAT in China, do not hesitate to talk to one of our company formation agents in China.
 

VAT registration threshold in China

 
The financial authorities agreed in 2018 for the new threshold for VAT registration in China, increased from CNY 30,000 to CNY 100,000, helping small companies in the country, for at least 2 years. This new tax rule is considered an important tax incentive to bolster the Chinese economy. Alongside this significant tax modification, the stamp duty has been eliminated, and the corporate income tax was reduced from 25% to 20% for small enterprises in China. Also, the reduction of local education taxes on businesses has been recently implemented in China. For complete information about the taxation system in China, you should talk to one of our company formation representatives in China.
 

VAT registration in China

 
Once the company is incorporated in China, the next step is to register for taxes and social contributions. The VAT is an important tax that needs to be observed and considered at the time the registration for taxation starts. The Certificate of Incorporation and the Articles of Association are among the needed documents for VAT registration in China. We remind that a company must appoint the legal representative to register for VAT in China. If all the documents are respected, the VAT Certificate is then issued by the financial authorities in China. Feel free to appoint one of our agents and let us handle the registration for tax purposes in China. You can also ask for accounting services in China and skip the formalities of setting up such a department in your firm.
 
How to register for VAT in China1.png
 

Other tax facts in China

 
Important tax changes have been implemented in China in the past year, as part of different government policies to boost the economy and to attract even more foreign investors. The reduction of the VAT rate and corporate income tax are two major financial changes for 2019 in China, even if experts in the economy declared their doubts regarding the negative global impact of this measure. The reduced corporate tax of 20% rate observes the small businesses in China and it is available until December 2020. There is also a consumption tax that ranges from 15 to 56% and it is applicable to luxury goods, high-end cosmetics, tobacco, non-essential products, particular coating products. As for the acquisition tax, this applies to the import of vehicles, trailers, motorcycles, trucks, carts, etc. For more details about the taxes in China, feel free to address to our team.
 

Making investments in China

 
China has a powerful economy and it is considered the second largest FDI recipient in the world after USA. The manufacturing sector, agriculture, and tourism, the financial sector, the IT and telecommunication are among the well-developed areas where most of the foreign investments are directed. The skilled and appreciated workforce, the business-friendly environment and the appealing tax structure are China’s benefits offered to international investors. You might want to take a look at the following numbers and facts that describe the business and economy direction in China:
 
  1. Around USD 1,627,719 million was the total FDI stock for China in 2018.
  2. In 2018, China ranked 46th out of 190 worldwide economies, as reported by the World Bank.
  3. Between 2018 and 2019, China was one of the top 10 improved economies.
  4. The Cayman Islands, Singapore, South Korea, USA, Japan, the Netherlands, Germany, and Taiwan are among the main investors in China.
  5. Most of the foreign investments are directed to the real estate sector, scientific research, manufacturing, construction, leasing business, and services.
 
If you need additional information about the VAT in China and about how can you register a company in this country, we kindly invite you to contact our team of company incorporation representatives in China.
 

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Call us now at +86-755-82148419 to set up an appointment with our company formation specialists in China. Alternatively you can incorporate your company without traveling to China.

As a Tannet Group Limited client, you will benefit from the joint expertize of local lawyers and international consultants. Together we will be able to offer you the specialized help you require for your business start-up in China. 

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