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Tax
system for foreign enterprises located in Shenzhen depends on the company`s
structure. This article focuses on the taxation for WFOE (Wholly Foreign Owned
Enterprise, also called WOFE), that is to say a Chinese corporation totally
owned by foreign investors. The details
information for Shenzhen WFOE taxation make you know better for Wholly Foreign
Owned Enterprise tax in Shenzhen.
WOFE have to pay 3 kinds of taxes
to the government. Two of them are common to every types of WOFE.
The
first one is the Income tax. It is calculated as follows:
Income
tax = (revenues– expenses – Business tax) x 25%
The
second one is an Additional tax which only applied to Chinese companies before
but has been extended to foreign companies since December 2010. It includes two
taxes. On one hand is the City Construction and Maintenance Tax which varies
from 1% to 7% according to the localization of the company (7% in cities, 5% in
suburban districts and towns and 1% in rural areas). On the other hand is the
Education surcharge with a fix rate of 3%. Both of them are calculated on the
whole tax base (Income tax + Business tax or VAT depending on the activity. For
example, this additional tax represents approximately 0.5% of a service company
turnover.
The
third taxation depends on the activity field of the company.
The first field of activity is
trading. WOFE specialized in this sector are subject to VAT. There are then 2
different cases.
One case
is the small VAT payer status which concern companies whose sales are:
- lower
than RMB 500,000 for companies producing taxable goods or delivering taxable
services;
- lower
than RMB 800,000 for companies doing wholesale or retailing.
The VAT
rate is lower for these kinds of firms but the drawback is that they cannot
deduce the VAT on purchasing. The formula is as follows:
VAT=
Turnover x VAT rate (depends on the Business scope, generally from de 3 to
5.5%, non refundable)
The
other case is the normal VAT payer status. It is mandatory for companies whose
turnover exceeds the amounts given for small VAT payers. In addition, companies
working in B to B must also choose this status because customers need VAT
invoices. The rate for normal VAT payer is quite higher but the VAT on
purchasing is refundable. Here is the calculation:
VAT=
Turnover x VAT rate (depends on the business scope, generally 17% but sometimes
13%) – deductible collected VAT
Furthermore,
companies importing goods from Shenzhen or somewhere else have to pay the
custom rights. The prices differ according to the type of product.
The
second field concerns services and consulting companies. These activities don`t
require VAT payment. Consequently, the third tax they have to pay is the
Business tax. It is always calculated in the same way:
Business
tax = revenues* 5%
The tax
declaration has to be done monthly for the VAT and the Business tax. The income
tax is determined on a yearly basis but advance fees have to be paid quarterly.
Contact
us
If
you have further queries, please contact Tannet
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hours Malaysia hotline：603-21418908;
24
hours Hong Kong hotline：852-27837818;
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hours Hong Kong hotline：86-755-
36990589;
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mytannet@gmail.com
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