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Foreign Investment in China
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China Taxes
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Expatriate's Corner
Scope of Services
Frequently Asked Questions
Wholly Foreign Owned Enterprises (WFOE)
A Wholly Foreign Owned Enterprise (WFOE) is a Limited Liability Company established in China by foreign investor(s). A WFOE is very much like a LLC in the USA that it requires one member only.
The registration procedures of a Wholly Foreign Owned Enterprise (WFOE) could be divided into 3 phases: aproval phase, registration phase and post-establishment phase.
A Wholly Foreign Owned Enterprise (WFOE) could be terminated by way of liquidation or deregistration by its investor(s) or when the conditions of termination in its Articles of Association occurs.
China Taxation
Under the current tax system in China, there are 25 types of taxes which could be divided into 8 categories. The major ones are Business Tax, Value Added Tax and Enterprise Income Tax. More
Representative Offices are also liable for Business Tax and Enterprise Income Tax. However, a RO could be exempted if its parent company is in the manufacturing business.
Any individual who has domicile in China or who has no domicile in China but has resided in China for one year or more shall pay Individual Income Tax on his world-wide income.

Enterprise Income Tax

(1) Taxpayers

The taxpayers of Enterprise Income Tax include any state-owned enterprise, collective enterprise, private enterprise, joint operation enterprise, joint equity enterprise, and other organizations.

(2) Tax base

The taxpayers' world-wide income from production and business operations and from other sources shall be subject to Enterprise Income Tax according to law. The Enterprise Income Tax is computed on the basis of the taxable income which is equal to the total income earned by the taxpayers in a tax year less allowable deductions for the same tax year.

(3) Tax rates and computation of tax payable

Normally, the amount of Enterprise Income Tax payable is computed on the basis of the taxable income and by applying the rate of 33%. The formula for computing the tax payable is:

Income tax payable= Taxable income × 33%
Besides the statutory rate, two lower rates of 18% and 27% are designed for some less profitable enterprises.

(4) Major tax exemptions and reductions

a. Enterprises operating in autonomous regions requesting for preferential treatment and incentives may be, upon the approval of the People's Government at provincial level, given tax reductions or exemptions for a specified period;

b. Tax exemption or tax reduction may be granted to enterprises or businesses that meet the relevant rules of the State, such as high-technology enterprises and enterprises engaged in tertiary industry set up in line with the relevant regulations of the State, enterprises using wastes as their key raw materials, newly-registered enterprises located in the revolutionary base areas, minority nationality areas, remote areas and poor areas approved by the State, enterprises-suffering from serious natural disasters, newly-registered service enterprises providing social employment opportunities, factories and farms run by schools under the educational administration departments, welfare production enterprises belonging to the civil administration departments, township enterprises, State-owned agricultural enterprises, etc..

Hong Kong Head Office              Room 803, Futura Plaza, 111 How Ming Street, Kwun Tong, Hong Kong
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