When a sourcing project gets to a certain size, it often makes sense to set up a permanent presence on-the-ground in China to help manage the supply chain. This series of blog posts covers some of the key areas of consideration when it comes to setting up in China.
In addition to the corporate income tax, China also imposes several forms of turnover tax. Turnover tax includes VAT and business tax. Whether an enterprise should pay VAT or business tax depends on the nature of its business and the type of products/services involved.
Sales of services, intangible property, and real estate are subject to business tax on gross revenue. Business tax is imposed on services provided by enterprises, except for a few prescribed services, as long as either the service provider or the service recipient is within China. The business tax rate typically ranges from 3% to 5%, depending on the type of activity, although some entertainment business are subject to a 20% tax on gross receipts.
Limited exemptions from business tax may apply to some services. In addition, the transfer of immovable properties and intangible assets in China are also liable for business tax.
Written for CSIC by Sophie Mao
China based lawyer at www.AsiaBridgeLaw.com