Business Overview
A guide on setting up a company in China and the types of taxes applicable to foreign businesses.
Setting up a company
Special economic zones, legal forms of companies, number of shareholders, amount of capital required, liability, registration procedure, regulations on equity investment
Taxation
Fiscal year, corporate tax, VAT rates, other important taxes
For a general overview on China, click here.
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What are special economic zones?
There are five special economic zones in China that are granted tax exemptions in order to attract foreign investment. They are the underdeveloped provinces of Shenzen, Zhuha, Shantou, Xiamen and the island of Hainan. The 14 coastal cities of Dalian, Shanghai, Ningbo, Wenzhou, Fuzhou, Guangzhou, Zhanjiang, Beihai, Tianjin, Yantai, Qinhuangdao, Qingdao, Lianyungang and Nantong also receive the same benefit. These are the key industrial areas where the government wants to further improve infrastructure.
Legal forms of companies
Youxian zeren gougsi (private limited company) and Gufen youxian gougsi (joint-stock company)
Number of shareholders/partners
| Private limited company | Minimum 2, Maximum 50 |
| Joint-stock company | Minimum 5 |
Maximum or minimum capital required
| Private limited company | Varies from RMB 300,000 to 500,000 depending on the activity |
| Joint-stock company | RMB 10m |
Liability
| Private limited company | Limited to the amount contributed |
| Joint-stock company | Limited to the shares held |
Registration and licensing procedure
There is no specific procedure for the establishment of the status. Capital and status must be registered with Provincial Department of Trade and Industry. The company by-laws and registration should be registered with the Trade Register.
Foreign exchange control
Currency exchange controls have been maintained, but operations on current accounts are no longer subject to it. The renminbi is not freely convertible. As for the right to transfer, the investor can transfer profits generated by his activity and invested capitals, without any delay of permanence.
Regulations on equity investment
Majority holding of capital of a local company is authorized in China. For the joint-stock company, foreign partners must hold at least 35% of the shared capital.
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Fiscal year
Begins on January 1
Corporate tax
| Tax rate for resident companies | 33 percent. In areas with particular status, companies with foreign capital which export part of their production can benefit from fiscal benefits. |
| Tax rate on long-term capital gain | 33 percent |
VAT rates
| Standard rate | 17 percent |
| Reduced rate | 13 percent for some products like water, electricity, farm produce; 0 percent for exported goods; 4-6 percent for small-scale business |
Other important taxes
Consumption Tax (CT)
Imposed on manufacturers and importers processing 11 categories of consumable/luxury goods (cigarettes, alcohol, petrol and automobiles, etc) at the rate of 3-45 percent.
Business Tax (BT)
Imposed on various service income (communication and transportation, construction, financial and insurance, posts and telecommunications, entertainment and servicing) at the rate of 3-20 percent.