| 2007 Tax Information (as of 31 Mar 2007)** |
China |
| Tax rates |
33%. Effective year of assessment ("YOA") 2008: 25%, with various tax rate reductions for different industries, activities and geographic locations. |
| Income not subject to tax |
Certain specified types of income such as dividend, interest income on loans to the central bank. Effective YOA 2008: Interest on state treasury bonds; dividend paid among qualified tax resident enterprises; dividend derived by certain non-tax resident enterprises; income derived by qualified non-profit organizations. |
| Non-deductible items. In general include: Expenses not related to earning assessable income; capital expenses (although depreciation may be claimed on certain categories of assets) and income tax; additional items as listed. |
Interest on capital; entertainment expenses above certain limit; fines and penalties. Effective YOA 2008: Equity investment return to investors; corporate income tax payment; tax surcharges; penalty, fine and loss through confiscation of property; non-charitable and charitable donations above certain limits; sponsorship; unverified provisions; other expenditure irrelevant to generation of income; interest on capital. |
| Tax incentives |
Holiday for manufacturing foreign investment enterprises ("FIEs"); reduced rates in certain areas; refund for foreigner reinvesting at least 5 years. Effective YOA 2008: 15% tax for certain high/new tech ventures; 20% for small firms; R&D "super deduction"; reduced taxable income for investment in encouraged industries; accelerated depreciation for certain assets; reduction for revenue from products made with certain resources; credit for certain environmental protection, conservation, and production safety machinery expenditures. |
| Loss treatment |
Carry forward 5 years. |
| Are dividends received taxed? |
Dividend received by FIE with a China source not taxable; dividend paid by FIE to its foreign investor exempt from withholding. Effective YOA 2008: Dividend received by foreign investor from FIE investee subject to 20% withholding if investor not a tax resident enterprise and dividend not connected with its establishment in China. |
| Taxes on capital gains on sale of assets |
Taxed as ordinary income. |
| Treaty network |
90 countries and 2 special administrative regions. 7 not yet effective. |
| Stamp duty |
Yes. |
| VAT/GST |
Generally 17%; 13% on certain goods; export refunds, with reductions for some goods; 3%, 5% or 20% tax on services and transfer of intangible assets. |
