Based on current trends, policy directions, and recent updates, here are some key areas to watch in China's tax landscape for 2025:
1. Continued Focus on Tax Compliance and Enforcement:
-
Enhanced Scrutiny: China continues to strengthen its tax administration and enforcement efforts.
Expect increased scrutiny of tax compliance, particularly for high-net-worth individuals, large corporations, and cross-border transactions.
Data Analytics and Technology: The tax authorities are likely to further leverage data analytics and technology to improve tax collection and detect tax evasion.
This includes expanding the use of "golden tax" systems and other digital tools.
2. International Tax Cooperation and BEPS:
- OECD/G20 Initiatives: China is actively involved in international tax cooperation and is likely to continue aligning its tax policies with initiatives from the OECD/G20, particularly those related to Base Erosion and Profit Shifting (BEPS) and the global minimum tax.
- Information Exchange: Expect continued participation in automatic exchange of information (AEOI) agreements and other international tax transparency initiatives.
3. Potential Adjustments to VAT System:
- VAT Reform: While major VAT reforms have been implemented in recent years, it is possible that there could be further fine-tuning or adjustments to the VAT system.
This could include changes to rates, exemptions, or input VAT credit rules.
Monitor for any updates related to specific industries.
- Digital Economy Taxation: As the digital economy continues to grow, China may introduce or refine tax rules related to digital services, cross-border e-commerce, and the taxation of the digital economy.
4. Tax Incentives and Support for Specific Sectors:
- Targeted Support: The government may introduce or adjust tax incentives to promote development in specific sectors, such as high-tech, advanced manufacturing, green energy, or small and medium-sized enterprises (SMEs).
These incentives could take the form of tax reductions, deductions, or preferential tax rates.
5. Property Tax Reform (Ongoing):
- Property Tax: China has been discussing and piloting property tax reforms for some time.
While the implementation timeline and details remain uncertain, it's a significant area to watch.
Any expansion of property tax could have a substantial impact on homeowners and the real estate market.
6. Individual Income Tax:
- Potential Adjustments: While no major overhauls are anticipated, there could be minor adjustments to individual income tax brackets, deductions, or specific tax incentives.
Key takeaway:
- China's tax system is dynamic.
While predicting specific changes is difficult, the general direction is towards enhanced tax compliance, alignment with international tax standards, and potential adjustments to the VAT system and other taxes to support economic development and social goals.
Staying informed and consulting with tax professionals is essential for businesses and individuals operating in China.
Over 6m new taxpayers in January-May period in China
July 2023
1.522 million new market entities in May have applied for tax-related business, such as taxes identification, invoice collection and tax payment declaration, an increase of 24.9 percent from the same period last year, data from the State Taxation Administration showed.
China GDP Shrink
April 2020
According to official data released on April 17, 2020 the Chinese economy shrank in the first quarter of 2020 by 6.8%, the first shrink since 1992.
In the last quarter of 2019 the economy grew by 6%.
China V.A.T. Cuts
April 2018
Starting May 1, 2018 there will be cuts in the Chinese V.A.T. rates. The current 17% rate will be reduced to 16% and the current 11% rate will be reduced to 10%.The reduced 6% V.A.T. rate will remain unchanged.
China V.A.T. Rates
May 2017
The Chinese state council announced on April 19, 2017 that starting July 1, 2017 the number of V.A.T. rates will be reduced from the current four rates of 6%, 11% , 13% and 17% to only three rates, abolishing the 13% rate.
China Russia Tax Treaty
May 2016
The 2014 double tax treaty, DTA, including the 2015 protocol between the two countries entered into force on April 9, 2016 applying from January 1, 2017.
The reduced tax withholding rates according to the DTA are 5%/10% for payment of dividend,0% for payment of interest and 6% for payment of royalties.
China Reduced 3% VAT Rate
July 2014
The Chinese ministry of finance and the state administration of taxation announced on June 13, 2014 that the previous V.A.T. rates of 4% and 6% will be reduced to a uniform 3% rate starting July 1, 2014.
China Belgium Tax Treaty
February 2014
The 2009 double tax treaty signed between the two countries entered into force on January 4, 2014 applying from January 1, 2015.
The tax withholding rates according to the tax treaty are 5%/10% for payment of dividends, 10% for interest and 7% for royalties.
China New Real Estate Rules
March 2013
China has decided to impose new measures in order to control the rising real estate prices.
The new rules include an increase of the down payment and mortgage interest rates for buyers of second homes in certain cities.
In addition the tax rate for sale of homes will rise from the current 1% - 2%to 20%.
China Banned Paying EU Carbon Tax
February 2012
According to the Chinese Xinhua news agency China banned its domestic airlines on February 6 from paying the EU carbon tax.
The carbon tax was imposed starting January 1, 2012 on all flights to or from EU countries.
The carbon tax is imposed by several countries including the US and India.
China U.K. New Double Tax Treaty
July 2011
China and the U.K. signed on June 27 a new double tax treaty, DTA, amending the existing DTA between the two countries.
The new DTA includes, inter-alia, an updated definition of permanent establishment, change of taxation of technical fees and reduced tax withholding rates for dividends and certain royalties.
The DTA will come into for after being ratified by both countries.
China Education Tax and Urban Construction and Maintenance Tax
April 2011
Starting 1.1.2011 foreign enterprises which are taxpayers of indirect taxes in China must pay these two additional surcharges.
Before 1.1.201 the two surcharges were not imposed on foreign enterprises doing business in China.
China's Real Estate Prices up 12.8%
May 2010
The Chinese statistics office announced on 11/5/2010 that the real estate prices in China's 70 biggest cities increased by 12.8% in April, compared to the previous year.
The increase follows a 11.7% increase in March.
Investors are worried that the Chinese central bank will increase the interest rate in an attempt to cool the real estate market.
Business Tax for Foreign Service Suppliers
April 2009
From 1.1.2009 there is a significant change regarding China's business tax laws.
In general business tax is imposed on provision of services and transfer of intangibles and immovable property.
Previously, before 2009, the tax was imposed on a territorial basis, namely ,only services provided in China territory were liable to business tax.
From 1.1.2009 services are liable to the tax if either the supplier or the customer are located in China .e.g. design services supplied outside China to a Chinese company are now liable to the tax.
Foreign companies supplying services to China, even when not having a business establishment in China ,must appoint a withholding agent in China, generally their business agent or their customer, to ensure payment of the business tax.
The new amendment has a significant impact on foreign service suppliers.
China New Corporate Tax Rate
January 2008
From 1.1.2008 China's new corporate tax rate is 25%. The new corporate tax rate applies to both domestic and foreign companies.
The new tax rate replaces the previous tax rate of 33%.
Foreign companies which set up activities before 2008 can enjoy, for a limited period, the previous 15% tax rate or tax holiday.
China V.A.T Refund for Exporters Reduction/Abolition
September 2007
According to a circular by the Chinese ministry of finance and the administration of taxation, effective from 1.7.2007 there is a major reduction of export VAT for 2,268 products.
For other 553 products, especially high energy consuming or polluting, the VAT export tax refund paid on inputs (previously 5%-13%) would be abolished.It is expected that the export of these products would be subject to output VAT.
For 10 other products, including oil paintings etc.
The VAT export refund was abolished.The export of these items is still VAT exempt.
China New Unified Corporate Tax
March 2007
The national people's congress approved in March 2007 a proposal unifying China's corporate tax at a rate of 25% for foreign and domestic companies alike.
The proposal meets China's commitment to the world trade organisation, WTO.
At present domestic companies pay a corporate tax of 33%, while foreign companies usually pay 15% or 24% tax, paid after a tax exemption in the first 2 years, and half of these rates in the next 3 years.
The proposed new tax rate is expected to attract tradional domestic companies, especially small and medium sized companies,wishing to establish a new wholly owned Chinese company.
The new law is expected to be effective from 1.1.2008.
China Income Tax
January 2006
From 1.1.2006 the monthly exemption on income from salary is CNY 1,600 for a Chinese resident (previously-CNY 800), and CNY 4,800 for a foreign resident(previously-CNY 4,000).
From 1.1.2006 any payer of any taxable income to individuals must deduct tax at source and provide the taxpayer's details to the Chinese tax authorities, who would create a taxpayer file and cross check his data.
Income Tax, Dividends
June 2005
The Chinese Finance Ministry issued a new notice, reducing individual's dividend income tax from domestic listed shares.
The new tax rate is still 20%, but only on 50% of the dividend income.
-
Enhanced Scrutiny: China continues to strengthen its tax administration and enforcement efforts.
Expect increased scrutiny of tax compliance, particularly for high-net-worth individuals, large corporations, and cross-border transactions. Data Analytics and Technology: The tax authorities are likely to further leverage data analytics and technology to improve tax collection and detect tax evasion.
This includes expanding the use of "golden tax" systems and other digital tools.
2. International Tax Cooperation and BEPS:
- OECD/G20 Initiatives: China is actively involved in international tax cooperation and is likely to continue aligning its tax policies with initiatives from the OECD/G20, particularly those related to Base Erosion and Profit Shifting (BEPS) and the global minimum tax.
- Information Exchange: Expect continued participation in automatic exchange of information (AEOI) agreements and other international tax transparency initiatives.
3. Potential Adjustments to VAT System:
- VAT Reform: While major VAT reforms have been implemented in recent years, it is possible that there could be further fine-tuning or adjustments to the VAT system.
This could include changes to rates, exemptions, or input VAT credit rules.
Monitor for any updates related to specific industries. - Digital Economy Taxation: As the digital economy continues to grow, China may introduce or refine tax rules related to digital services, cross-border e-commerce, and the taxation of the digital economy.
4. Tax Incentives and Support for Specific Sectors:
- Targeted Support: The government may introduce or adjust tax incentives to promote development in specific sectors, such as high-tech, advanced manufacturing, green energy, or small and medium-sized enterprises (SMEs).
These incentives could take the form of tax reductions, deductions, or preferential tax rates.
5. Property Tax Reform (Ongoing):
- Property Tax: China has been discussing and piloting property tax reforms for some time.
While the implementation timeline and details remain uncertain, it's a significant area to watch.
Any expansion of property tax could have a substantial impact on homeowners and the real estate market.
6. Individual Income Tax:
- Potential Adjustments: While no major overhauls are anticipated, there could be minor adjustments to individual income tax brackets, deductions, or specific tax incentives.
Key takeaway:
- China's tax system is dynamic.
While predicting specific changes is difficult, the general direction is towards enhanced tax compliance, alignment with international tax standards, and potential adjustments to the VAT system and other taxes to support economic development and social goals.
Staying informed and consulting with tax professionals is essential for businesses and individuals operating in China.
Over 6m new taxpayers in January-May period in China
July 2023
1.522 million new market entities in May have applied for tax-related business, such as taxes identification, invoice collection and tax payment declaration, an increase of 24.9 percent from the same period last year, data from the State Taxation Administration showed.
China GDP Shrink
April 2020
According to official data released on April 17, 2020 the Chinese economy shrank in the first quarter of 2020 by 6.8%, the first shrink since 1992.
In the last quarter of 2019 the economy grew by 6%.
China V.A.T. Cuts
April 2018
Starting May 1, 2018 there will be cuts in the Chinese V.A.T. rates. The current 17% rate will be reduced to 16% and the current 11% rate will be reduced to 10%.The reduced 6% V.A.T. rate will remain unchanged.
China V.A.T. Rates
May 2017
The Chinese state council announced on April 19, 2017 that starting July 1, 2017 the number of V.A.T. rates will be reduced from the current four rates of 6%, 11% , 13% and 17% to only three rates, abolishing the 13% rate.
China Russia Tax Treaty
May 2016
The 2014 double tax treaty, DTA, including the 2015 protocol between the two countries entered into force on April 9, 2016 applying from January 1, 2017.
The reduced tax withholding rates according to the DTA are 5%/10% for payment of dividend,0% for payment of interest and 6% for payment of royalties.
China Reduced 3% VAT Rate
July 2014
The Chinese ministry of finance and the state administration of taxation announced on June 13, 2014 that the previous V.A.T. rates of 4% and 6% will be reduced to a uniform 3% rate starting July 1, 2014.
China Belgium Tax Treaty
February 2014
The 2009 double tax treaty signed between the two countries entered into force on January 4, 2014 applying from January 1, 2015.
The tax withholding rates according to the tax treaty are 5%/10% for payment of dividends, 10% for interest and 7% for royalties.
China New Real Estate Rules
March 2013
China has decided to impose new measures in order to control the rising real estate prices.
The new rules include an increase of the down payment and mortgage interest rates for buyers of second homes in certain cities.
In addition the tax rate for sale of homes will rise from the current 1% - 2%to 20%.
China Banned Paying EU Carbon Tax
February 2012
According to the Chinese Xinhua news agency China banned its domestic airlines on February 6 from paying the EU carbon tax.
The carbon tax was imposed starting January 1, 2012 on all flights to or from EU countries.
The carbon tax is imposed by several countries including the US and India.
China U.K. New Double Tax Treaty
July 2011
China and the U.K. signed on June 27 a new double tax treaty, DTA, amending the existing DTA between the two countries.
The new DTA includes, inter-alia, an updated definition of permanent establishment, change of taxation of technical fees and reduced tax withholding rates for dividends and certain royalties.
The DTA will come into for after being ratified by both countries.
China Education Tax and Urban Construction and Maintenance Tax
April 2011
Starting 1.1.2011 foreign enterprises which are taxpayers of indirect taxes in China must pay these two additional surcharges.
Before 1.1.201 the two surcharges were not imposed on foreign enterprises doing business in China.
China's Real Estate Prices up 12.8%
May 2010
The Chinese statistics office announced on 11/5/2010 that the real estate prices in China's 70 biggest cities increased by 12.8% in April, compared to the previous year.
The increase follows a 11.7% increase in March.
Investors are worried that the Chinese central bank will increase the interest rate in an attempt to cool the real estate market.
Business Tax for Foreign Service Suppliers
April 2009
From 1.1.2009 there is a significant change regarding China's business tax laws.
In general business tax is imposed on provision of services and transfer of intangibles and immovable property.
Previously, before 2009, the tax was imposed on a territorial basis, namely ,only services provided in China territory were liable to business tax.
From 1.1.2009 services are liable to the tax if either the supplier or the customer are located in China .e.g. design services supplied outside China to a Chinese company are now liable to the tax.
Foreign companies supplying services to China, even when not having a business establishment in China ,must appoint a withholding agent in China, generally their business agent or their customer, to ensure payment of the business tax.
The new amendment has a significant impact on foreign service suppliers.
China New Corporate Tax Rate
January 2008
From 1.1.2008 China's new corporate tax rate is 25%. The new corporate tax rate applies to both domestic and foreign companies.
The new tax rate replaces the previous tax rate of 33%.
Foreign companies which set up activities before 2008 can enjoy, for a limited period, the previous 15% tax rate or tax holiday.
China V.A.T Refund for Exporters Reduction/Abolition
September 2007
According to a circular by the Chinese ministry of finance and the administration of taxation, effective from 1.7.2007 there is a major reduction of export VAT for 2,268 products.
For other 553 products, especially high energy consuming or polluting, the VAT export tax refund paid on inputs (previously 5%-13%) would be abolished.It is expected that the export of these products would be subject to output VAT.
For 10 other products, including oil paintings etc.
The VAT export refund was abolished.The export of these items is still VAT exempt.
China New Unified Corporate Tax
March 2007
The national people's congress approved in March 2007 a proposal unifying China's corporate tax at a rate of 25% for foreign and domestic companies alike.
The proposal meets China's commitment to the world trade organisation, WTO.
At present domestic companies pay a corporate tax of 33%, while foreign companies usually pay 15% or 24% tax, paid after a tax exemption in the first 2 years, and half of these rates in the next 3 years.
The proposed new tax rate is expected to attract tradional domestic companies, especially small and medium sized companies,wishing to establish a new wholly owned Chinese company.
The new law is expected to be effective from 1.1.2008.
China Income Tax
January 2006
From 1.1.2006 the monthly exemption on income from salary is CNY 1,600 for a Chinese resident (previously-CNY 800), and CNY 4,800 for a foreign resident(previously-CNY 4,000).
From 1.1.2006 any payer of any taxable income to individuals must deduct tax at source and provide the taxpayer's details to the Chinese tax authorities, who would create a taxpayer file and cross check his data.
Income Tax, Dividends
June 2005
The Chinese Finance Ministry issued a new notice, reducing individual's dividend income tax from domestic listed shares.
The new tax rate is still 20%, but only on 50% of the dividend income.
Note: The information in this site is for general guidance only. Users of this site are advised to take professional advice before taking practical tax decisions.
Please read our terms of service before entering this site.