Whether your business is located in China or elsewhere in the world, China Tax Compliance is often extremely difficult to understand, especially in comparison to other jurisdictions.
Taxation in China is administered by the State Administration of Taxation which is the Government body that determines tax laws and rates in China. Handling and collection of taxes however is dealt with at a local Provincial and even City level by the regional tax bureaus.
In general, most taxation schemes apply nationally but there are often cases where regional differences can arise. These can occur for several reasons, for example:
- Tax incentives in China that apply only to specific regions or industries
- Policies and changes that are first tested / trialed regionally before expansion nationwide (for example recent VAT reform)
- Special tax rates or policies which apply to Free Trade Zones
To many companies, the tax system in China can appear complex and confusing. One of the main reasons for this is that the rules and tax rates change frequently which comes partly from a rapidly changing business environment (China’s modern taxation system that only really started in the 1980s), and partly from the governments ongoing desire to improve the market for both domestic and foreign companies in China.
Hong Kong Corporate Services Group spends a great deal of time keeping up-to-date on China Taxation and how it will impact our clients business, even to the point of calling individual tax offices at Provisional level to make sure the tax rates applied are clear before our clients setup their operations.