Corporate Income Tax

1. Taxpayer

Resident Enterprises shall pay Corporate Income Tax on income derived from sources inside and outside China.  Non-resident Enterprises which have an establishment or place in China shall pay Corporate Income Tax on income that is derived by such establishment or place in China from sources inside China as well as on income that, although derived from sources outside China, is effectively connected with such establishment or place. For Non-resident Enterprises which have not any establishment or place in China, or although have an establishment or place in China but their income is not effectively connected with such establishment or place, they shall pay corporate income tax on income derived from sources inside China only.

2. Taxable Items and Tax Rates

Income subject to Corporate Income Tax refers to incomes derived by the Enterprises from various sources, including: income from sales of goods; income from provision of services; income from transfer of property; dividend and profit distribution, etc. from equity investment; interest income; rental income; royalty income; income from receipt of donation; and other income.

Under the prevailing Corporate Income Tax law and regulations, the stipulated Corporate Income Tax rate shall be 25% for both domestic enterprises and foreign enterprises.  The applicable tax rate for Non-resident Enterprises shall be 20% and the Corporate Income Tax shall be levied at the reduced rate of 20% for qualified Small and Thin-profit Enterprises.  For High/New Tech Enterprises that are specifically supported by the State, the Corporate Income Tax shall be levied at the reduced rate of 15%

3. Computation of Tax Payable

Tax Payable = Taxable Income x Applicable tax rate - Reduced/exempted tax - Tax credit

Reduced/exempted tax and tax credit as stated in the formula shall refer to the tax payable that is reduced, exempted and credited pursuant to the preferential tax treatments as prescribed under the Corporate Income Tax Law or by the State Council.