Selling To China

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Made-For-China? Made Easy!
How Big Is China Market? ​Bigger Than You Think!
The Made-for-China phenomenon is spurred by three drivers. First, there is the sheer size of the Chinese market. Second, many multinationals these days recognize that Chinese consumers have needs and preferences that can be very distinct from those in other markets. For instance, many Chinese owners of luxury cars do not drive them themselves but use a chauffeur. Hence, the need for extra space and comfort in the back of these cars. Finally, the firm may create a new brand specifically for the Chinese market in order not to dilute the core flagship brand.
Connect to Chinese influencers, you can achieve faster and sell more!

Legal Forms of Companies

Equity Joint Venture (EJV)

The number of partners: Minimum of one Chinese entity and minimum one foreign entity.
Capital (max/min): No minimum capital required, but at least 25% must originate from foreign investors.
Shareholders and liability: Limited to the number of contributions.

Co-operative Joint Ventures (CJV)
The number of partners: Minimum of two partners: one Chinese entity and one foreign entity.
Capital (max/min): No minimum capital required.
Shareholders and liability: Limited to the number of contributions.

Foreign Investment Joint Stock Company (JSC)
The number of partners: Minimum two partners.
Capital (max/min): Minimum capital needed: CNY 5 million if domestic capital, CNY 30 million if foreign capital.
Shareholders and liability: Each shareholder contributes the same amount to the share capital and is linked to the company by its share of the share capital.

Chine Holding Company (CHC)
The number of partners: Minimum one partner.
Capital (max/min): Minimum capital USD 30 million.
Shareholders and liability: Each shareholder contributes the same amount to the share capital and is linked to the company by its share of the share capital.

Enterprises Federation
Chinese Association of International SME Cooperation
Find a Company or a Financial Report
Ministry of Commerce

Intellectual Property

​National Organisations
National Office of intellectual property (SIPO), Trademark Office (SAIC)

Business Contract

Law Applicable to the Contract
Law on contracts

Legal Framework of Business

  • Equal Treatment of Nationals and Foreigners

The judiciary does not guarantee an impartial trial to a foreign national. A high degree of corruption has been reported in the country and within the CCP.

  • The Language of Justice

Mandarin-Chinese

  • Recourse to an Interpreter

Possible

  • Legal Similarities

The legal system is based on the Confucian philosophy of the social order by moral education. After the 1911 revolution, the Republic of China mainly adopted a legal code of Western-type inspired by German law. The establishment of the People’s Republic of China in 1949 brought a Soviet system influenced by socialism. There does not exist a tradition of constructive law in China and the first civil code dates from the beginning of the year 1980. As compared to Western laws, it is written in a rather incomplete fashion, which leaves an important place for arbitrary judgments. The law is subject currently to a progressive reform encouraged by external and internal pressures. The constitution in force currently was promulgated in December 1982.

Corporate Taxes

  • Tax Base For Resident and Foreign Companies

Resident companies are taxed on their world incomes and the nonresident companies on Chinese incomes.

  • ​Tax Rate For Foreign Companies

Generally, foreign companies may only engage in indirect business activities through a representative office (RO) in China. ROs are similarly taxed as Chinese companies but are not allowed to sign contracts with Chinese customers or engage in direct business operations.

  • Capital Gains Taxation

There is no separate capital gains tax; capital gains (and losses) of companies generally are combined with other operating income and taxed at the corporate income rate. The sale of real estate, net development costs, is subject to the Land Appreciation tax at 30 to 60% (depending on the percentage of the gain realized).

  • Main Allowable Deductions and Tax Credits

Generally, all documented expenses, costs, and losses in generating taxable income are deductible up to a limit e.g. entertainment (60% deductible up to 0.5% income), advertising (up to 15% income) and donations (up to 12% income). Non-deductible items include dividends, management fees, Enterprise Income Tax (EIT) paid and late tax payment surcharge fees.

A deduction is allowed for the amortization of intangible assets, such as, but not limited to, patents, trademarks, copyrights, and land use rights. Generally, intangible assets have to be amortized over a period of not less than ten years. Organizational and start-up expenses are tax-deductible fully in the first year of operation. Interest on loans generally is tax-deductible. Charitable donations are tax-deductible at up to 12% of the annual accounting profit. Non-charitable donations, as well as sponsorship expenditures that are non-advertising and non-charitable in nature, are not deductible.

For R&D expenses incurred for new technology, new products, or new craftsmanship, an extra 50% of the actual expenses incurred are also tax-deductible as an incentive (from 1 January 2017 to 31 December 2019, the extra 50% deduction is increased to 75% for qualified small and medium-sized technology enterprises).

Preferential tax treatment in the form of incentives are further granted to new high-technology enterprises (HNTE), companies in special economic zones (SEZ) and pilot free trade zones (FTZ), while exemptions may apply to agriculture, forestry, fishery, software, infrastructure, and other specified environment and technology developments.

  • Other Corporate Taxes

The VAT applies to the sale of goods, provision of processing, repair or replacement services within China and the import of goods into China. Rates vary depending on the taxpayers’ sales revenue, type of goods and type of sector.

Business tax (3 – 20%) is levied on the sale of a property and natural resources, as well as specific services provided in China, including construction, financial and entertainment.

A real estate tax, which is based on the value of the property or rental received, is assessed annually on land and buildings used for business purposes or leased. The tax rate is 1.2% of the original value of buildings. A tax reduction of 10% to 30% is commonly offered by local governments. Alternatively, the tax may be assessed at 12% of the rental value.

A land appreciation tax is levied on the gain from the disposal of properties at progressive rates from 30% to 60%. Land appreciation tax is deductible for CIT purposes.

A deed tax, generally at rates from 3% to 5%, maybe levied on the purchase, sale, gift, or exchange of ownership of land use rights or real properties. The transferee/assignee is the taxpayer.

A consumption tax is imposed on specified categories of luxury and environmentally unfriendly goods, including cigarettes, alcoholic beverages, high-end cosmetics, jewelry, gasoline, automobiles, battery, and coating, etc. The tax liability is computed based on the sales amount and/or the sales volume, depending on the goods concerned.

For taxpayers that are subject to VAT, business tax or consumption tax, a national education surcharge tax of 3% and city maintenance and construction surcharge tax applies. 7% is levied on taxpayers in cities, 5% in counties and 1% in other areas.

Stamp duty (0.005% – 0.1%) is levied on specific legal documents, such as certificates of transfer of property rights and business account permits. Share transactions on a domestic exchange are also subject to a 0.1% tax.

Local Chinese authorities levy a resource tax on the exploitation of mineral products or the production of salt on territory within their jurisdiction. This tax is applied to the selling price for energy resources (e.g. natural gas, coal, crude oil) and to the volume of products sold or used for other taxable resources.

Local authorities may also charge a discretionary license tax for vehicles.

  • Other Domestic Resources

Doing Business: China, to obtain a summary of taxes and mandatory contribution

Accounting Rules

  • Tax Authorities

State Council of the PRC
State Administration of Taxation of the PRC
Organizational Chart of China’s Tax Administration
Ministry of Finance

  • Country Guides

Deloitte International Tax Guide – China 2017

  • Accounting Standards

The accountancy standards for companies were put into effect by the Ministry of Finances (MOF). China established its first complete standards specific to accountancy in 1997 and the MOF promulgated an additional 13 standards more specific to accountancy since then.
Chinese Accounting Standards for Business Enterprises (ASBEs) are mandatory for listed Chinese enterprises. Other Chinese enterprises are encouraged to apply the ASBEs, which are substantially in line with IFRS, except for certain modifications that reflect China’s circumstances and environment. China is committed to converging with IFRS.

Foreign Invested Enterprises (FIE) may prepare financial statements in accordance with other accounting standards or in other languages for global consolidation purposes. However, the Chinese authorities will only recognise and accept accounts in Chinese that are prepared based on Chinese accounting standards.

  • Accounting Regulation Bodies

Ministry of Finance
CASC, Chinese Committee of Accounting Standards
CICPA, Chinese Institute of Chartered Accountants

  • Accounting Law

Initially promulgated in 1985, the accounting law of December 1993 was updated in 1999. It includes the legal standards governing accountancy and forms the base for the formulation of administrative rules and regulations for accounting.
Difference Between National and International Standards (IAS/IFRS)
China adopted Accounting Standards for Business Enterprises (ASBEs) that are substantially converged with IFRS standards. ASBEs are imposed on all Chinese companies whose securities trade in a public market in China. Additionally, Chinese companies whose securities trade on the Stock Exchange of Hong Kong have the option to choose among IFRS Standards, Hong Kong Financial Reporting Standards (HKFRS), and Chinese Accounting Standards (ASBEs). According to latest reports (IFRS Foundation, 2017), 30% of Chinese companies that capitalize on 69% of the market in Mainland China already use IFRS standards.

  • Accounting News

China Accounting News (EN)

From 1 January to 31 December

  • Accounting Reports

Audit reports normally contain a paragraph defining the ‘task’ or ‘scope’ and a paragraph of the opinion. The paragraph of opinion aims to establish if the accounts were prepared according to the appropriate rules/regulations and any reservations in opinion must be elaborated above.

Statements of financial accounts or reports should comprise a balance sheet, profit and loss accounts, a report of gross margin of self-financing, notes on the accounts and an account for the appropriation of profits and losses.

  • Nature of the Tax

Value-added tax (VAT) and consumption tax

  • Standard Rate

While the standard rate is 17%, it varies depending on the taxpayer status, type of product and service and type of sector. For instance, small-scale taxpayers that fall within a certain sales threshold pay only 3% compared to general taxpayers who pay 17%. A reduced rate of 13% applies to a specific food, books, and utilities. A 6% VAT also applies to interest payments. Interest paid to a nonresident individual generally is subject to a 20% withholding tax unless the rate is reduced under a tax treaty.

  • Reduced Tax Rate

Preferential rate of 3% for small companies.

Sale of certain products (running water, books, medicines, newspapers and magazines, certain agricultural products, chemical fertilizers, liquefied gas, coal for domestic use) are taxed at the preferential rate of 13%. Telecommunication, transportation and postal service providers are subject to 11% (basic services) and 6% (value-added services) VAT.

  • Exclusion From Taxation

Exported products are exempt from consumption tax. The VAT is also not levied on international transport services, including the cross-border and overseas transport of passengers and cargo, and R&D and design services for overseas entities.
Method of Calculation, Declaration, and Settlement
The VAT rate is applicable to volume (taxation by volume) or on the value of the goods (ad valorem taxation).
Payable in RMB at the official rate at the time of import for imported products (at the customs, at the tax office for products manufactured locally). More information on China Tax.

  • Other Consumption Taxes

Consumption tax applies to prescribed nonessential and luxury or resource-intensive goods (including alcohol, luxury cosmetics, fuel oil, jewelry, motorcycles, motor vehicles, petrol, yachts, golf products, luxury watches, disposable wood chopsticks, tobacco, certain cell, and coating products), and it mainly affects companies involved in producing or importing these goods. The tax is calculated based on the sales value of the goods, the sales volume or a combination of the two. The proportional consumption tax rate is from 1% to 56% on the sales revenue of the goods. Exports are exempt.

Business tax ranges from 3% to 20% apply to the sale of real estate and the sale of other intangible goods and services that are not taxed under VAT.

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