What Is Involved in Income Tax Planning?
Corporate income tax is a type of income tax levied on the production and operation income and other income of enterprises and other income-earning organizations in China.
corporate income tax
- Chinese name
- corporate income tax
- Foreign name
- Corporate income tax
- Including
- Resident business,
- A resident enterprise shall pay corporate income tax on its income derived from within and outside China.
- Corporate income tax is a type of income tax levied on the production and operation income and other income of enterprises and other income-earning organizations in China.
- Adopted at the Fifth Session of the Tenth National People's Congress on March 16, 2007
- Amended in accordance with the "Decision on Amending the" People's Republic of China Enterprise Income Tax Law "at the 26th Meeting of the Standing Committee of the 12th National People's Congress
- Within the territory of the People's Republic of China, enterprises and other organizations that obtain income (hereinafter collectively referred to as enterprises) are taxpayers of corporate income tax. Taxpayers of corporate income tax include various enterprises, institutions, social organizations, private non-enterprise units and other organizations engaged in business activities. Sole proprietorships and partnerships are not taxpayers of corporate income tax.
- The corporate income tax adopts a dual jurisdiction combining the jurisdiction of the source of income and the jurisdiction of the residents. The enterprise is divided into resident enterprises and non-resident enterprises, and different tax liabilities are determined respectively.
- 1. A resident enterprise refers to an enterprise established in China according to law, or an enterprise established in accordance with foreign (regional) laws, but the actual management agency is in China.
- 2. Non-resident enterprises refer to those established in accordance with foreign (regional) laws and the actual management agency is not in China, but has established an institution or place in China, or has no institution or place in China, but has income derived from China. Business.
- The new Enterprise Income Tax Law and its implementing regulations came into effect on January 1, 2008. Compared with the original tax law, the new tax law has outstanding changes in many aspects. The relevant person in charge of the Income Tax Management Department of the State Administration of Taxation recently
- 2. If a non-resident enterprise establishes an institution or place in China, it shall pay for the income derived from the territory of China from the institution or place it has established and the income that actually occurs outside of China but has actual connection with the institution or place it has established corporate income tax.
If a non-resident enterprise does not establish an institution or place in China, or if the income obtained by the non-resident enterprise has no actual connection with the institution or place it has established, it shall pay corporate income tax on its income derived from China.
- 3. Principles for determining income from within and outside China
- The total amount of revenue that an enterprise receives from various sources in monetary and non-monetary forms. include:
(1) Revenue from the sale of goods;
(2) Income from providing labor services;
(3) Income from the transfer of property;
(4) income from equity investments such as dividends and bonuses;
(5) Interest income;
(6) Rental income;
(7) Revenue from royalties;
(8) Accept donation income;
(9) Other income.
- "
- On April 24, 2014, after the State Council announced the expansion of income tax incentives for small and micro enterprises, taxpayable small and micro enterprises will enjoy preferential policies, which will increase from 26% to more than 85%. [5]
- Tax year
- It is from January 1 to December 31 of the Gregorian calendar. If a taxpayer opens a business in the middle of a tax year, or due to mergers, closures, and other reasons, the actual operating period of the tax year is less than 12 months, the actual operating period shall be regarded as a tax year;
- Enterprise income tax regulations stipulate that the calculation of taxpayer's taxable income is based on the accrual basis, and at the same time, sales of goods and long-term projects (
- State-owned enterprise income tax
- State-owned enterprise income tax
- The principles for setting up state-owned enterprise income tax are:
- The principle of taking into account the interest relationship between the state, enterprises and employees;
- The principle of balancing efficiency and fairness;
- (3) The principle of easy collection and management. The taxpayers of state-owned enterprise income tax are all-ownership enterprises engaged in industry, commerce, transportation, construction and installation, finance and insurance, catering services, as well as education, scientific research, culture, health, material supply and marketing, urban public utilities and other industries. Business unit. The taxable objects are the income from production and operation and other income obtained by enterprises (units) during the tax year from abroad. Its tax rate is divided into two categories. One is the state-owned large and medium-sized enterprises applying a 55% proportional tax rate; the other is state-owned small enterprises applying a class 8 excess progressive tax rate, with a minimum tax rate of 10% and a maximum tax rate of 55%. Its collection method is to implement annual collection, prepayment on a daily or quarterly, monthly, and quarterly basis, final settlement at the end of the year, and more refunds and less supplements. The tax law stipulates that for enterprises with special difficulties in paying state-owned enterprise income tax, tax exemption, regular tax reduction, tax reduction at a certain rate, or one-time or regular tax exemption can be taken into account. The establishment of the state-owned enterprise income tax system is an important part of the reform of the urban economic system.
- Its significance is mainly:
- The distribution relationship between the state and the enterprise is fixed in the form of an order. The enterprise has the responsibility and obligation to pay taxes in accordance with the law, so that the state's fiscal revenue has a legal guarantee and can grow steadily with the economic development;
- The enterprise has its own source of income stipulated by law. With the development of production, the enterprise will get its due share from the newly increased profits, so that the responsibilities, rights and benefits of the enterprise are better combined;
- (3) The economic function of taxation can be better exerted, which is conducive to regulating production, circulation and distribution, and strengthening macro-control and guidance;
- It is conducive to improving the enterprise management system and financial management system, reducing unnecessary administrative intervention, and improving the external environment for business operations.
- In the 1994 tax system reform, in accordance with the principle of "fair tax burden and promotion of competition", the method of setting up income tax according to the form of enterprise ownership was abolished, and a unified domestic enterprise income tax system was implemented. It is stipulated that all enterprises or organizations that implement independent economic accounting in the territory of the People's Republic of China are taxpayers of corporate income tax. The corporate income tax implements a 33% proportional tax rate, which appropriately reduces the corporate tax burden and simplifies the calculation of corporate income tax.
- Collective corporate income tax
- Collective corporate income tax is a tax levied by the state on income from production and operation of collectively-owned enterprises engaged in industry, commerce, construction and installation, transportation, service, and other industries. Collective corporate income tax evolved from the original industrial and commercial income tax.
- The Provisional Regulations on Industrial and Commercial Taxes promulgated by the Government Affairs Office of the Central People's Government in 1950 include two parts, business tax and income tax. It stipulates that all industrial and commercial enterprises are subject to income tax, except for state-owned enterprises. At that time, the taxpayers of income tax were mainly private enterprises and individual industrial and commercial households in urban and rural areas, and collective enterprises accounted for a small proportion. In order to implement the state's policy on capitalist industrial and commercial use, restriction, and transformation, the income tax is implemented at 21; a progressive tax rate at the full level. If the annual income at the lowest level is less than 300 yuan, the tax rate is 5% and the annual income at the highest level. Above 10,000 yuan, the tax rate is 30%. For various forms of collective enterprises, in accordance with the principle of different treatment, based on the implementation of a uniform income tax rate, appropriate tax reductions and exemptions will be granted.
- The reform of the industrial and commercial tax system in 1958 merged the business tax portion of the industrial and commercial tax with the commodity circulation tax, goods tax, and stamp duty into a unified industrial and commercial tax, retaining the income tax in the original industrial and commercial tax. Income tax became a separate tax, called "industrial income tax". Because the socialist transformation of private industry and commerce was basically completed, and most of the individual industrial and commercial households in urban and rural areas were organized, collective enterprises became the main taxpayers.
- In 1963, the State Council promulgated the "Provisional Regulations on Adjusting the Industrial and Commercial Income Tax Burden and Improving Levy Measures," according to "Individual economy must be heavier than collective economy, cooperative stores must be heavier than handicraft cooperatives, transportation cooperatives, and other collective economies. "Generally balanced" principle, adjusted the income tax rate. Rival industrial cooperatives and transportation cooperatives implement an 8-level excessive progressive tax rate; implement a 9-level excessive progressive tax rate on cooperative stores, and levy 10% to 40% on the annual income of more than 50,000 yuan; supply and marketing at the grassroots level The company implements a proportional tax rate of 39%; it implements a 14-level full progressive tax rate on individual industrial and commercial households, and if the annual income exceeds 1800 yuan, a 10% to 40% bonus is levied.
- After the state-owned enterprise implemented the second step of "profit-for-tax reform" in 1984, the "Interim Regulations on the Collective Enterprise Income Tax of the People's Republic of China" was formulated in accordance with the development of collective enterprises and the requirements of economic system reform. , Implemented since 1985. Collective corporate income taxpayers include collective enterprises engaged in industrial, commercial, service, construction and installation, transportation, financial, and other industries. At the same time, the taxpayer should be an independent collective enterprise.
- The taxation object of collective corporate income tax is the taxable income of collective enterprises, that is, the total income of the tax year minus costs and expenses, the balance of taxes allowed by the state before income tax and non-operating expenses. Collective corporate income tax applies a uniform 8-level excessive progressive tax rate regardless of industry and enterprise size. The lowest level of annual income is less than 1,000 yuan, the tax rate is 10%; the highest level, the annual income is more than 200,000 yuan, the tax rate 55%. This tax rate is the same as the income tax rate of state-owned small enterprises. In order to take care of the difficulties existing in the production and operation of collective enterprises and to support the development of certain collective enterprises in accordance with national policies, tax reduction clauses are also provided in the tax law.
- Collective corporate income tax is levied on a yearly basis, quarterly or monthly advance payment, year-end reconciliation settlement, more refunds and less compensation. Collective corporate income tax is the main means by which the state participates in the distribution of collective corporate profits. By collecting income tax on collective enterprises, the income level can be reasonably adjusted, which is conducive to the correct handling of the state. The distribution relationship between collectives and individuals is conducive to implementing the principle of reasonable burden and balancing the tax burden between collective enterprises and between collective enterprises and other enterprises with various economic components. In this way, various types of enterprises can compete under roughly the same tax burden conditions, which is conducive to guiding collective enterprises to carry out production and operation in accordance with the state's plans and policies, to rectify their business direction, and to adhere to the socialist road. At the same time, it is also conducive to strengthening the state's supervision and management of collective enterprises, promoting collective enterprises to strengthen internal management, and improving economic benefits.
- In the 1994 tax system reform, the method of setting up income tax according to the form of enterprise ownership was abolished, the collective corporate income tax, the state-owned corporate income tax, and the private corporate income tax were merged to uniformly collect domestic-funded corporate income tax.
- Private corporate income tax
- Private enterprise income tax is a tax levied on the income from production and operation of private enterprises and other income. Since the reform and opening up in 1979, with the development of the individual economy, private enterprises with privately owned assets and a certain number of employees have emerged.
- The seventh session of the National People's Congress passed a constitutional amendment. Article 11 of the Constitution added the following provision: "The state allows the private economy to exist and develop within the scope prescribed by law, and the private economy is a supplement to the socialist public ownership economy." Implementing guidance, supervision and management to encourage its healthy development, the State Council issued on June 25, 1988 the "Interim Regulations on Private Enterprise Income Taxes" and the "Regulations on the Collection of Individual Income Adjustment Taxes for Private Enterprise Investors".
- On November 17, 1988, the Ministry of Finance issued the "Implementation Rules for the Provisional Regulations on Private Enterprise Income Tax". The taxpayers of private enterprise income tax are urban and rural private enterprises engaged in industry, construction, transportation, commerce, catering, and other industries (assets belong to privately-owned, for-profit economic organizations with more than 8 employees). The tax basis for private enterprise income tax is the total income of the taxpayer for each year, after deducting costs, expenses, taxes allowed by the state before the income tax, and the balance after non-operating expenses, that is, the private enterprise's taxable income. The tax rate for private corporate income tax is a 35% proportional tax rate. Private enterprise income tax is calculated on an annual basis, paid in advance in months or quarters, and reconciled at the end of the year. The income of private enterprise investors from after-tax profits is used for personal consumption, and a personal income adjustment tax is levied at a rate of 40%.
- Sino-foreign joint venture income tax
- The income tax of a Sino-foreign joint venture is a tax levied on the income from production and operation of the Sino-foreign joint venture.
- In accordance with the policy of opening up to the outside world, in order to adapt to the new situation of setting up Sino-foreign joint ventures, on September 10, 1980, the Third Session of the Fifth National People's Congress passed the "People's Republic of China Sino-foreign Joint Ventures Income Tax Law" On December 14, the same year, with the approval of the State Council, the Ministry of Finance announced the implementation rules. This is China's first foreign-related corporate income tax law. It is formulated in accordance with the principles of safeguarding national rights and interests, lighter tax burdens, more favorable policies, and simpler procedures. The taxpayers of Chinese-foreign joint ventures' income taxpayers are foreign joint ventures of Chinese-foreign joint ventures and Chinese-foreign joint ventures. The taxation objects are income from production, operation and other income of the joint venture. The income from production and operation refers to the income from production and operation in industries such as industry, extractive industry, transportation, agriculture, forestry, animal husbandry, tourism, and catering service. Other income refers to dividends, dividends, interest income, and transfers of property, as well as income from the provision of patents, know-how, trademark rights, copyrights, etc.
- In addition, the tax law also stipulates that taxes are levied on profits remitted abroad by foreign joint venturers. Since a Chinese-foreign joint venture is an enterprise registered and registered in accordance with Chinese laws, it is a Chinese legal person. Its head office is located in China and it is a Chinese legal resident for tax purposes. According to the provisions of the tax law, all income obtained in China and abroad shall be calculated and paid in China. However, the income tax paid by an enterprise and its branches overseas may be deducted from the taxable amount calculated by the head office, and the deducted amount shall not exceed the taxable amount of overseas income calculated in accordance with the Chinese tax law. In order to help attract foreign investment and take into account the interests of the state, enterprises, and investors, the income tax of Chinese-foreign joint ventures adopts a proportional tax rate of 30%, and a local income tax of 3% is levied on taxable income. 10% of the foreign joint venturer's profits remitted from the enterprise are taxed at the remittance amount. According to the tax law, the total income of a joint venture for each tax year, after deducting costs, expenses, and losses, is the taxable income.
- There are two ways to collect this tax:
- The taxpayer shall declare and pay on time. That is, it is levied on an annual basis and paid in advance on a quarterly basis. Within 5 months after the end of the year, the settlement is paid and more refunds are made and less supplemented;
- Withholding and withholding, that is, when the foreign joint venturer remits the profits shared by the joint venture, the remittance unit will withhold the tax according to the remittance amount.
- The tax reduction and exemption regulations are mainly:
- If the newly established Chinese-foreign joint venture has a joint venture period of more than 10 years, it will be exempted from income tax in the first year and reduced by half in the second and third years. On September 2, 1983, the second meeting of the Standing Committee of the Sixth National People's Congress of the People's Republic of China decided to extend the period of tax reduction and exemption, to exempt corporate income tax in the first and second years, and reduce corporate income tax by half in the third to fifth years. .
- Chinese and foreign joint ventures with lower profits such as agriculture and forestry, and Chinese and foreign joint ventures established in remote areas with underdeveloped economies, in addition to reducing income tax for the first five years of profit, can continue to reduce corporate income tax for the next ten years 15% to 30%.
- (3) If the profits shared by foreign joint ventures are used in China and are not remitted, no withholding tax will be levied. If you reinvest in China for a period of not less than 5 years, you can also return 40% of the corporate income tax paid on the reinvested part. On April 9, 1991, the Fourth Session of the Seventh National People's Congress passed and promulgated the "People's Republic of China Foreign Investment Enterprises and Foreign Enterprises Income Tax Law", which came into effect on July 1, 1991; The Income Tax Law on Joint Ventures was repealed at the same time.
- Foreign corporate income tax
- Foreign enterprise income tax is a tax levied on the income of foreign partners and foreign enterprises in Sino-foreign cooperative operations. The "People's Republic of China's Foreign Enterprise Income Tax Law" was adopted by the Fourth Session of the Fifth National People's Congress, promulgated on December 13, 1981, and came into effect on January 1, 1982. With the approval of the State Council, the Ministry of Finance announced the implementation rules on February 21, 1982. This is another direct foreign-related enterprise income tax law enacted by China following the promulgation of the income tax law for Chinese-foreign joint ventures.
- According to the tax law, the taxpayer of this tax has three aspects:
- Establishing institutions in China, wholly-owned foreign companies, enterprises and other economic organizations;
- Foreign enterprises cooperating with Chinese enterprises in production and operation in China;
- (3) Foreign enterprises that have no establishment in China but have income derived from Chinese dividends, interest, rent, royalties, etc.
- The taxation objects of foreign corporate income tax are:
- Income from production and operation in China and other income. Including income from production, operation, and other non-operating gains in industry, mining, transportation, agriculture, forestry, animal husbandry, fishing, husbandry, commerce, services, and other industries.
- Get investment income from China. Including dividends or shared profits from enterprises in China; interest on deposits, loans, advances, deferred payments, etc. obtained from China; rents obtained by leasing property to renters in China; and provision in China Revenues from the use of various patents, know-how, copyrights, trademarks, etc. The above two aspects are determined based on the taxation principle of the source of income. According to the tax law: "The total income of a foreign enterprise for each tax year, after deducting costs, expenses, and losses, is the taxable income."
- For investment income obtained without establishing an institution, unless otherwise specified, the taxable amount is calculated based on the full amount of income, and the payment unit withholds the amount of each payment. Foreign corporate income taxes are subject to excess progressive tax rates. Divided into 5 levels according to the amount of income, the lowest level is the annual income of not more than 250,000 yuan, the tax rate is 20%, the highest level is the annual income of more than 1 million yuan, the tax rate is 40%, in addition, A 10% local income tax is also levied on the taxable income. The total of the two items shall not exceed 50%. Foreign corporate income tax is levied on an annual basis and is paid in advance on a quarterly basis. In order to facilitate the absorption of foreign capital and the introduction of technology, in addition to the investment in the exploitation of offshore oil resources, the depreciation of fixed assets can be accelerated and the investment recovery can be accelerated, there are several other benefits:
- For foreign enterprises engaged in agriculture, forestry, animal husbandry and other low profit margins, if the operating period is more than 10 years, after applying for approval, income tax can be reduced or exempted regularly from the year when the profit begins; after the expiration period, The income tax will continue to be reduced by 15% to 30% for the next 10 years.
- Interest income earned by international financial organizations on loans to the Chinese government and the State Bank of China, and interest income on loans from foreign banks to the State Bank of China at preferential rates are exempt from income tax.
- (3) During the period from 1983 to 1995, foreign companies signed credit contracts or trade contracts with Chinese companies and enterprises, as well as the interest obtained from leasing trade contracts and the lease fee after deducting the equipment price. The tax rate is levied on income tax. The interest which belongs to the export credit interest rate is exempt from income tax.
- The royalties collected by foreign companies for providing proprietary technologies in agriculture, animal husbandry, scientific research, energy, transportation, prevention and control of environmental pollution, and development of important technical fields can be reduced by 10% income tax. Among them, advanced technology and favorable conditions are exempt from income tax. The issuance and implementation of foreign corporate income tax will play a positive role in promoting China's foreign economic and technological exchanges, and better implementing the guidelines and policies of using foreign capital and introducing technology.
- Foreign investment corporate income tax
- The income tax of foreign-invested enterprises and foreign enterprises refers to a tax levied on the production, operating income, and other income of foreign-invested enterprises located in China, as well as the production, operating income, and other income of foreign enterprises originating in China. The "Tax Law of the People's Republic of China on Foreign-Invested Enterprises and Foreign Enterprises" summarizes more than a decade of practical experience in reform and opening up, and refers to international practices to merge the "People's Republic of China's Sino-foreign Joint Venture Income Tax Law" and "People's Republic of China Foreign Enterprise Income Tax Based on the Law, which was formulated after long-term research, it was adopted at the Fourth Session of the Seventh National People's Congress and will be implemented from July 1, 1991.