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China Tax System
 

◇ Current Tax System
◇ Tax System and Adjustments in 2015


China's current tax framework was put in place after the tax reform in 1994 to meet the needs of the socialist market economy. Since the beginning of 21st
century, the Chinese government has made a series of adjustments of and improvements to the tax system, which have guaranteed the government's revenue
stream and contributed to the country's rapid economic growth.



Current Tax System
There are 18 different kinds of taxes in China, which can be divided into three categories according to their nature.
◆ Goods and services taxes, including VAT, Excise Tax, Business Tax, Vehicle Purchase Tax and Customs Duty. (See Table 3)
◆ Income taxes, including Corporate Income Tax and Individual Income Tax. (See Table 4)
◆ Property and behavior taxes, including Land Appreciation Tax, Real Estate Tax,Urban and Township Land Use Tax, Arable Land Use Tax, Deed Tax, Resources Tax, Vehicle and Vessel Tax, Stamp Duty, Urban Maintenance and Construction Tax, Tobacco Tax, and Vessel Tonnage Tax. (See Table 5)





Tax System and Adjustments in 2015
Business Tax to VAT Reform well underway
The Business Tax to VAT Reform is not only an important strategic measure introduced at a critical time when China is upgrading its economy, but also a most important building block of the fiscal and tax reforms.
This reform has made steady progress since its introduction three years ago. The VAT pilot program, initially covering the transportation sector and certain modern services, was launched nationwide on August 1, 2013. Since January 1 2014, the pilot program was extended to cover railway transportation and mail services. Since June 1 2014, the telecommunication services sector was also included in the pilot program.
By the end of 2015, a total of 5.92 million corporate taxpayers in China had been brought under VAT in the pilot program, including 1.13 million general VAT payers and 4.79 million small-scale VAT payers. In 2015, this reform reduced tax liabilities of the new VAT taxpayers by 144.6 billion RMB, while the previous VAT taxpayers deducted input VAT on a broader scope, leading to a reduction of 122 billion RMB in tax liabilities. Consequently, the VAT reform has had far-reaching strategic significance by stimulating growth and promoting competitiveness among business sectors.
Preferential treatments for small-scale and marginal profit businesses continued
Since August 1 2013, small-scale VAT and Business Tax taxpayers with monthly turnover below 20,000 RMB have been temporarily exempted from their respective VAT and Business Tax liabilities. Between October 1 2014 and December 31 2015,the exemptions for VAT and Business Tax had been expanded to small-scale VAT and Business Tax taxpayers with monthly turnover ranging from 20,000 to 30,000 RMB. In 2015, this policy was further extended to the end of 2017.
Before January 1 2014, qualified small-scale and marginal profit enterprises with an annual taxable income of 60,000 RMB or less were entitled to a reduction in tax base of 50% and a preferential rate of 20%. Since January 1 2014, this preferential treatment has been granted to those with an annual taxable income of 100,000 RMB or less. The benchmark was raised further to 200,000 RMB on January 1 2015, and to 300,000 RMB on October 1 2015.
In 2015, tax reduction for small-scale and marginal profit enterprises totaled 101.54 billion RMB, including 17.7 billion RMB reduction of CIT and 83.84 billion RMB reduction of VAT and Business Tax.
Resource Tax Reform moving along
On May 1 2015, Resource Tax on rare earth, tungsten and molybdenum started to be collected on ad valorem basis throughout country. At the same time, the
Resource Tax rate on ferrous ore was reduced to 40%.
Excise Tax Reform scaled up
On January 13, 2015, the Excise Tax rate for refined oil products was further raised.On February 1, 2015, batteries and coating materials became subjected to Excise Tax. On May 1, 2015, the ad valorem tax rate on cigarette for wholesale was raised from 5% to 10 %, and an additional per unit tax levied at 0.005 RMB/cigarette.

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