Corporate Income Tax
What is the rate?
30% (federal tax) + 3% (local tax)
Are there any tax incentives?
The local government can reduce or even waive the 3% local tax. However, the 30% federal tax can only be cut if the laws allow. Bellow are some major examples where federal tax rate is 15%.
Special Economy Zone
Company incorporated in special economy zone, namely Shenzhen, Zhuhai, Xiamen, Shantou and Hainan province. Please note except for Hainan province, special economy zone covers part of the city.
Economy Development Zone (approved by the central government)
There are many economy development zones in China but not all have the approved by the central government to enjoy the income tax break.
High Tech Zone (approved by the central government)
Again, the same caveat.
Common Tricks of Some Local Government
To attract foreign investments, some local governments make tax promise which we think is not legal. Some local governments set up economy zones where they promise to waive a lower income tax rate. One should access the situation based on the golden question whether the central government approves the lower income tax rate. It is common legal sense that local government cannot pass laws on federal tax.
Some local government extends the boundaries of economy development zone to cover different areas within the city. As far as we know, the central government's approval has a fixed boundaries. Hence, all extension by the local government should be in law interpreted as zone not approved by the central government for lower income tax.
There are fine prints in other some federal law approved tax cut. So, please take note.
Can I consolidate past losses?
Yes. Losses can be consolidated but there is a 5 year time limit.
Is tax holiday legal?
There was a time
that all production based foreign investments enjoy a 2 years of full tax break
and 3 years of half tax break almost as of right. Such approval is becoming much
more difficult to obtain. For service providing foreign investments, there is no
tax holiday at all.