Taxes are the most important source of revenue in the People’s Republic of China. The tax system is streamlined and geared towards a socialist market economy. In 2020 and 2021, the gross revenues were 15431 billion and 17273.1 billion Chinese yuan respectively. While the Ministry of Finance is charged with making tax policies, actual tax deductions are carried out by the state administration of taxation.
Types of taxes
there are 26 types of taxes presently in the country. However, they can be divided into 8 categories based on their nature. Turnover taxes, income taxes, resource taxes, etc.
Turnover taxes
They include three taxes, namely, Value Added Tax, Consumption Tax, and Business Tax. The tax deducted for these taxes depends on the volume of turnover or sales of the taxpayers in the manufacturing, circulation, or service sectors.
Income taxes
This consists of the Enterprise Income Tax and Individual Income Tax. They are charged based on the profits made by producers, or the income received by individuals.
Enterprise income tax applies to entities such as domestic enterprises as state-owned enterprises, collectively owned enterprises, private enterprises, etc. It is taxed at a 25% rate. However, the concession rate for high-tech corporations is 15%.
The Individual Income Tax works with a progressive tax system, having tax rates from 3% to 45%. Residents and non-residents have to pay this tax. A resident taxpayer pays IIT on all income gotten from local and foreign sources. Whilst nonresident taxpayers are subject to levies on the income made in China. Incomes taxable are charged annually; while others are levied monthly.
| Taxable income (monthly) | tax rate |
| 1 – 2,999 | 3% |
| 3,000 – 11,999 | 10% |
| 12,000 – 24,999 | 20% |
| 25,000 – 34,999 | 25% |
| 35,000 – 54,999 | 30% |
| 55,000 – 79,999 | 35% |
| 80,000 and above | 45% |
Note: Tax exemption of 5000 RMB applies to both residents and non-residents.
Currently, people who do not reside within the territory are levied on global income if they are present in mainland China for 183 days or more in a tax year. For those who stay in the state below 183 days, the tax is imposed on their locally-sourced income only.
Resource taxes
This consists of Resource Tax and Urban and Township Land Use Tax. They apply to persons or firms involved in natural resource exploitation or the users of urban and township land. They reflect the chargeable use of state-owned natural resources.
Taxes for special purposes
They include taxes such as City Maintenance and Construction Tax, Farmland Occupation Tax, Fixed Asset Investment Orientation Regulation Tax, Land Appreciation Tax, and Vehicle Acquisition Tax. They are deducted from the sales of specific items for special regulative purposes.
Property taxes
They cover House Property Tax, Urban Real Estate Tax, etc. Chongqing and Shanghai have varying tax rates between 0.4% and 1.2%. They must apply to income from second homes, luxury properties, and purchases by non-residents.
Behavioral taxes
This consists of the Vehicle and Vessel Usage Tax, Vehicle, and Vessel Usage License Plate Tax, Stamp Tax, Deed Tax, Securities Exchange Tax (not yet levied), Slaughter Tax, etc. all of which are taxed based on specified behavior.
Agricultural taxes
These include taxes such as Agriculture Tax (including Agricultural Specialty Tax) and Animal Husbandry Tax. They are imposed on the enterprises, units, and/or individuals earning income from agricultural and animal husbandry activities.
Customs duties
They are levied on all imported goods and products as well as exports out of the territory of mainland China.
Foreign investment taxation
In China, 14 types of taxes apply to foreigners with foreign investment, and their foreign enterprises. They include VAT, Consumption Tax, Business Tax, Income Tax on Enterprises with Foreign Investment and Foreign Enterprises, Individual Income Tax, Resource Tax, Land Appreciation Tax, Urban Real Estate Tax, etc. Macau, Hong Kong, Taiwan, and Chinese overseas businesses with their investments are levied as regards the tax scheme applicable to foreigners, entities with foreign investment, and foreign enterprises.
