How to plan taxes for a company registered in China? What taxes need to be paid?
When registering a company in China, in addition to preparing for the business operations, entrepreneurs need to have a basic understanding of the relevant taxes. This is necessary in order to be able to manage income and plan for taxes properly.
Legal entities in China are categorized by company size as follows:
| Company size | Profits |
|---|---|
| Small companies | annual revenue not exceeding 5 million yuan (15 million baht). |
| Large companies | annual revenue exceeding 5 million yuan. Once revenue exceeds this threshold, the company can no longer use the conditions for small companies. |
Tax Planning for Company Registration in China
Tax planning is important for companies that will register in China. There are several types of taxes that must be considered, as follows:
- Corporate Income Tax
Companies in China must pay a 25% corporate income tax rate on net profits.
However, there are tax deductions or exemptions for certain types of companies. For example, small companies with an annual revenue not exceeding 5 million yuan (around 15 million baht) are eligible for a reduced 20% tax rate. - Value Added Tax (VAT)
VAT is levied on the sale of goods and services at rates of 13%, 9%, 6% or 0%, depending on the type of goods/services.
Companies can deduct input VAT from output VAT. - Surtaxes on Business Income
In addition to corporate income tax, there are surtaxes such as education tax, social security contributions, environmental taxes, etc. - Individual Income Tax and Labor Contributions
Companies must withhold individual income tax from employees’ salaries based on set rates.
Companies also must pay social security, medical insurance, unemployment insurance, pension fund contributions, etc. - Property, Real Estate and Land Taxes
If a company owns real estate or land, it is subject to property tax, urban land use tax, deed tax on property transfers, etc.
Planning taxes effectively can help a company save costs and optimize cash flow. One method is considering investment zones, as some areas offer tax exemptions or reductions under investment promotion policies.
Apart from hiring experienced consultants or agents for establishing companies in China, it’s advisable to consult with a tax advisor specialized in Chinese tax law. This ensures a tailored tax strategy for your business, compliance with regulations, and mitigates tax risks effectively.
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Intelligence Business (Thailand) Co., Ltd. for assistance with all these issues. “We take care of every step for you.”
