In China, the tax for foreign enterprises and individuals are different from that of domestic ones, called foreign tax, which is rare in the world. There are almost 14 taxes including value added tax (VAT), sales tax, corporate income tax (CIT), personal income tax (PIT), urban real estate tax, vehicle and vessel usage license plate tax, stamp tax, land appreciation tax, deed tax, etc. Tax Distribution Systems is applied in China, which means that the central and local government can levy taxes according to their jurisdiction and management. Therefore, it may cause the differences of tax and rate among cities. eg. bund fee, city planning tax, and educational surtax are exempted to foreign enterprises usually, exception in some cities.

Basically, the taxes for foreign enterprises are almost the same, except the corporate income tax varied in sector and area. Value added tax and sales tax are separated form each other, the former one for the enterprises mainly engaging in service industry, intangible assets transfer, real estate sales; the later one for the enterprises mainly engaging in manufacture and business trade. Since general tax such as stamp tax, urban real estate tax, and vehicle and vessel usage license plate tax is at a low rate, there will be no big affect for the enterprises. Withholding tax is another tax foreign enterprise should concern. Withholding tax is increased from 0% to 10% since the new Tax Law was introduced in Jan 1, 2008. On the whole, foreign investors should understand the local tax system well before investing on company or factory in China in order to gain the tax incentives.

Since Jan 1, 2008, corporate income tax was unified to 25% for both domestic and foreign enterprises. For those small-scale enterprises with meager profit, the rate is 20%; and for those high-tech enterprises, the rate is 15%. Enterprises incorporated before Mar. 16, 2007, there are 5-year transition period, enjoying 18%, 20%, 24% to 25% from 2008 gradually.

For the new enterprises registered in 12 provinces in western China (Guangxi, Chongqing, Sichuan, Shaanxi, Yunnan etc.) or 3 prefectures, the tax rate is 15% before Dec. 31, 2010. For those manufacturing enterprises with an operation period over 10 years, they still can enjoy “2-year free and 3-year half” tax incentives.

VAT: Since Jan 1, 2009, the tax was reduced to 3% for small-scale taxpayer of industry and trade from 6% and 4%. If the annual turnover of industry and trade company is over RMB 1m and RMB 1.8m respectively, they can apply for general taxpayer to enjoy “Exempt, Credit, Refund” tax incentives.

PIT: If foreign workers stay in China for a successive 90 days or adding-up over 183 days, they should pay PIT for their income gaining from China. The tax is levied on the progressive 9 grades from 0% to 45%. The deduction is RMB 4,800 for foreign workers and RMB 2,000 for local workers.

Deed tax: When purchasing land or house, the buyer (enterprise or individual) should pay the tax at a time according to the strike price.

Educational surtax & City planning tax: It is stipulated that foreign enterprises are free from these two taxes, but there are some exceptions, eg. city planning tax in Shenzhen, and educational surtax in Xiamen, Fuzhou and Kunshan.

Bund fee: It is levied based on turnover. River course management fee in Shanghai is based on turnover tax, rated at 0.5%; and water conservation fund in Ningbo is based on turnover, rated at 0.1%.

Land appreciation tax: Amount of tax = Value added capital× rate-deduction number× deducted rate（deducted rates are 0%/ 5%/ 15%/ 35%）.