China, People's Republic of
Social security contributions
Social security contributions to pension funds, medical funds, etc. are mandatory for Chinese employees. As of 15 October 2011, foreign individuals who hold a China work permit for working in China are required to make social security contributions in relation to pension, medical (including maternity), unemployment and work-related injury according to the China Social Security Law. Monthly employer and employee social security contribution rates, applicable caps, etc. are governed by local rules, which may vary among the local jurisdictions. For example, contribution rates and caps applicable to local Chinese in Shanghai, Beijing, and Guangzhou are as follows:
|Social insurance items||Employee's portion||Employer's portion||Employee's portion||Employer's portion||Employee's portion||Employer's portion|
|Unemployment||0.5%||0.5%||0.2%||0.8%||0.2%||0.32% to 0.8%|
|Work-related injury||0%||0.16% to 1.52%||0%||0.16% to 1.52%||0%||0.1% to 0.7%|
|Total||10.5%||27.16% to 28.52%||10.2%||27.76% to 29.12%||10.2%||20.77% to 21.85%|
|Ceiling for monthly salary base||CNY 28,017||CNY 26,541 for pension, unemployment and work-related injury; CNY 29,732 for medical insurance||CNY 20,268 for pension; CNY 30,876 for other insurances|
- The rates and ceilings are valid as of 31 December 2020 and are subject to changes in accordance with local regulations.
- The contribution base is normally capped at 300% of the City Average Salary (CAS) of the preceding year and adjusted annually or on needed basis.
The employer is obligated to withhold the applicable social contributions of employees from payroll for onward payment, together with the employer's contributions, to the relevant local authorities on a monthly basis.
China now has totalisation agreements in force with ten countries. Inbound employees who are citizens or assigned by employers of these countries can be partly exempted from China's social security contributions in accordance with the coverage of the relevant totalisation agreements. Set out below is a list summarising the respective dates of entry into force of the ten agreements and the social security items exempted under each agreement.
|Country||Date of entry into force||Items of social security exempted|
|Germany||4 April 2002||Pension and Unemployment Insurance|
|Republic of Korea||16 January 2013||Pension and Unemployment Insurance|
|Denmark||14 May 2014||Pension|
|Canada||1 January 2017||Pension|
|Finland||1 February 2017||Pension and Unemployment Insurance|
|Switzerland||19 June 2017||Pension and Unemployment Insurance|
|The Netherlands||1 September 2017||Pension and Unemployment Insurance|
|Spain||20 March 2018||Pension and Unemployment Insurance|
|Luxembourg||1 May 2019||Pension|
|Japan||1 September 2019||Pension|
China has also signed totalisation agreements with France and Serbia, which will not enter into force until both contracting states complete the necessary internal legal procedures. Inbound employees from these countries may have certain China social security exemptions after the relevant totalisation agreements are effective.
Value-added tax (VAT)
An individual engaged in the sale or importation of goods, the provision of services, and the sales of intangible properties and immovable properties is subject to VAT. For general VAT payers, input VAT can be credited against output VAT.
The applicable VAT rates (for general VAT payers) from 1 April 2019 are set out in the following table, and the rate for small-scale VAT payers is 3%.
|Industries||Applicable VAT rate (%)|
|Sales or importation of goods||13|
|Sales or importation of necessity goods (e.g. agricultural products, water, gas)||9|
|Provision of repairs, replacement, and processing services||13|
|Tangible movable property leasing services||13|
|Transportation services, postal services, basic telecommunications services, construction services, immovable property leasing services, sales of immovable properties, transfer of land-use right||9|
|Value-added telecommunications services, financial services, modern services (except for leasing services), consumer services, sales of intangible properties (except for land-use right)||6|
Exportation of goods; exportation of repair, replacement, and processing services; international transportation services and spacecraft transportation services; exported services that are completely consumed outside China, including:
An individual is usually a small-scale VAT taxpayer subject to the VAT rate of 3%. However, individuals engaged in privately-owned business may be recognised as general VAT taxpayers as long as certain criteria, such as sales amount, etc., have been met. Unlike general VAT taxpayers, small-scale taxpayers are not allowed to claim input VAT credits for the VAT paid on their purchases.
Individuals are exempt from VAT if the income derived is below certain thresholds. The provincial level tax bureaus are authorised to determine the exact thresholds within the following ranges:
- Monthly sales amount of no more than CNY 100,000 for registered VAT payer.
- Sales amount of no more than CNY 300 or CNY 500 per transaction/day if the individual is subject to VAT on a transaction basis and not a registered VAT payer.
A consumption tax is imposed on specified categories of luxury and environmental unfriendly goods, including cigarettes, alcoholic beverages, high-end cosmetics, jewellery, gasoline, automobiles, battery and coating, etc. The tax liability is computed based on the sales amount and/or the sales volume, depending on the nature of the goods.
Urban construction and maintenance tax
Urban construction and maintenance tax is imposed at a certain rate on the amount of China's indirect taxes (i.e. VAT and consumption tax) payable by the taxpayer. Effectively, the taxpayers of indirect taxes are also the taxpayers of urban construction and maintenance tax. It is charged at three different rates depending on the taxpayer's location, i.e. 7% for urban areas, 5% for county areas, and 1% for other areas.
Educational surtax is imposed at 3% on the amount of China's indirect taxes (i.e. VAT and consumption tax) payable by the taxpayer. Effectively, the taxpayers of indirect taxes are also the taxpayers of educational surtax.
Local educational surtax
Local educational surtax is levied at 2% on the amount of China's indirect taxes (i.e. VAT and consumption tax) payable by the taxpayer. Effectively, the taxpayers of indirect taxes are also the taxpayers of local educational surtax.
Net wealth/worth taxes
There are no net wealth/worth taxes in China.
Inheritance, estate, and gift taxes
At present, there are no inheritance, estate, or gift taxes in China.
Real estate tax
A real estate tax, which is based on the value of the real property or rental received, is assessed annually on land and real properties used for business purposes or leased. The annual tax rate is 1.2% of the original value of real properties, and a tax reduction of 10% to 30% is commonly offered by local governments. Alternatively, tax may be assessed at 12% of the rental value. Individuals are exempt from real estate tax if the property is not used for business purposes or rented out.
Urban and township land-use tax
An urban and township land-use tax is levied on taxpayers, including individuals, who utilise land within the area of city, country, township, and mining districts. It is computed annually based on the space of area actually occupied by a taxpayer multiplied by a fixed amount per square metre that is determined by the local governments. In many provinces/cities, individuals are exempt from urban and township land-use tax for holding residential properties.
Land appreciation tax
A land appreciation tax is levied on the gain from the disposal of land use rights or real estate properties at progressive rates ranging from 30% to 60%. Individuals are exempt from land appreciation tax for selling residential properties.
Import and export customs duty is levied on goods that are allowed to be imported into or exported based on the relevant customs regulations. The Consignee of imported goods, consignor of export goods, and owner of entry articles are parties held liable for paying customs duties.
The customs classification of import and export goods is the base for the customs supervision, customs taxation, and customs statistics. In 2017, along with the revisions of the classified catalogue in ‘International Convention for Harmonized Commodity Description and Coding System’ made by World Customs Organisation (WCO), large scale adjustments have been made to China’s import and export tariff system.
Import duty is charged in ad valorem, specific, compound, or sliding terms, etc. Ad valorem duty is charged based on the customs valuation of the goods. The dutiable value of the goods is multiplied by an ad valorem duty rate to arrive at the amount of duty payable. Duty collection on an ad valorem basis is the main taxation measure used by most countries, including China. The dutiable value of import and export goods is the taxable value determined by the Customs to levy ad valorem duties on the import and export goods, which is the base to value and levy customs duties payable of import and export goods and import links taxes payable of the import goods.
Import duties are categorised as normal tariff rate, Most Favoured Nation (MFN) tariff rate, contractual tariff rate, preferential tariff rate, tariff-rate quota (TRQ) rate, and temporary tariff rate.
The Country of Origin of imported goods also plays a part in determining the applicability of a number of other trade policies, such as TRQ, preferential tariffs, anti-dumping duty, anti-subsidy duty, etc.
Import and export goods are reduced with or exempted from customs duties, import VAT, and consumption tax according to state regulations.
The importation of raw materials under processing trade is bonded, and customs duty, import VAT, and consumption tax exemption is allowed on the part to be re-exported after processing.
For goods that enter into and exit from the customs special supervision zone, import duties, import VAT, and consumption tax are held over at the time of importation, which are to be exempted for exportation and to be paid for sales from the customs special supervision zone to domestic markets.
A deed tax, generally at rates ranging from 3% to 5%, may be levied on the purchase or sale, gift or exchange of ownership of land use rights or real properties. The transferee/assignee is the taxpayer.
Individuals who execute or receive 'specified documentation' are subject to stamp duty.
The stamp duty rates vary between 0.005% on loan contracts to 0.1% for property leasing and property insurance contracts.
Treatment of foreign-owned real estate
A foreign individual is subject to deed tax and stamp duty upon the purchase of real property in China.
A foreign individual is subject to IIT, VAT, real estate tax, stamp duty, plus some minor local taxes on its rental income.
A foreign individual is subject to IIT, VAT, land appreciation tax, and stamp duty, plus some minor local taxes upon the disposal of real property in China. Individuals are exempt from land appreciation tax for selling residential properties.
Motor vehicle acquisition tax
A motor vehicle acquisition tax, at a rate of 10% of the taxable consideration, on any purchase, import, self-production, receipt as a gift or award, etc. of an automobile, a tramcar, a trailer, or a motorcycle with a gas displacement of over 150 millilitres within China.
Vehicle and vessel tax
A vehicle and vessel tax is a tax that is levied on all vehicles and vessels within China. A fixed amount is levied on a yearly basis. Transport vehicles are generally taxed on a fixed amount according to their own weight, with passenger cars, buses, and motorcycles being taxed on a fixed unit amount. Vessels are taxed on a fixed amount, according to the deadweight tonnage.