The Chinese economy has grown at a supersonic speed, with its GDP rising from USD178 billion in 1979 to USD16.8 trillion in 2021. This makes it the second-biggest economy after that of the US. However, China’s economy has already surpassed that of the US when measured by purchasing power parity (PPP). This super growth has become so attractive for businesses, and you should not be left behind. So, are you ready to expand your business to China?
To take advantage of the Chinese market, you need to start by registering a company in China, and complying with all the tax requirements. The two are never easy because you need to deal with multiple departments for company registration, and the tax system is pretty complex. Again, there are so many compliance requirements, but these should not dull your resolve to take advantage of the fast-growing Chinese economy to grow your business. The best solution is using tax advisory and compliance services in China.
Facts about China’s Tax System and Compliance Requirements
One notable thing about China is that it takes tax matters and compliance with different policies very seriously. As you enter the Chinese market, it is paramount to ensure you understand all the obligations, such as taxes and accounting standards, to avoid getting into conflict with the law. Here are some useful highlights about the legal requirements for your enterprise:
● The corporate tax rate for businesses working in China is 25%. However, there are a number of exceptions. For example, High and New Technology Enterprises (HNTE) are charged 15% while software development companies attract only 10% in corporate taxes.
● Value-added tax. This is considered a consumption tax and is based on a percentage of the involved sale of goods/ services in China. The formula used to calculate it is: VAT Payable = Output VAT – input VAT.
● Consumption tax: This tax varies from 1% to 56%. For example, tobacco items attract a consumption tax of between 36% and 56%, while motorcycles only attract 3%.
● Business tax: This is taxed on the gross turnover of a business and it ranges from 34% to 20%.
● According to the Taxation Collection Reform Plan of 2019, China empowered the Tax Bureau to calculate, collect, and check companies’ social insurance contributions.
● The new E-commerce Law of the People’s Republic of China included non-conventional shopping channels, such as social media, as e-commerce channels. Therefore, income generated from such platforms must be factored in when calculating the tax obligations of a company.
Benefits of Using Tax Advisory and Compliance Services in China
The tax obligations we have listed above are only a few; the list can be longer. This makes compliance a major challenge for investors and managers who are already very busy working towards growing their enterprises. This is why you should work with tax advisory and compliance services in China. Here are the main advantages of using professionals for tax compliance:
● Helping you to do your books accounts correctly and filing tax returns on time.
● The experts tackle the tax matters for your business professionally.
● You are relieved to work on other core matters of the business as experts handle the tax-related considerations.
● The company provides advisory on tax compliance and related matters for your company.
● Helping to cut cost for compliance with tax-related regulations
● The experts in tax and compliance can help you with crafting or enriching your company’s strategy for growth
Doing business in China is lucrative, but you need to do your bit, and that is compliance with all tax and other legal requirements. Working with experts in tax advisory and compliance services in China like Fiducia makes it easy to understand the complex tax environment and avoid breaking related laws. The experts offering the advisory services can also assist you with payroll management and other services you need to thrive.
