Invest in Shanghai · Tax Treasury

Author: / Country: Mainland China
Publisher:
Publish Date: 2003-06-01
Features: The current tax system of our country consists of 24 tax types, which are roughly divided into 7 categories based on their nature and function:
● Circulation Tax Category: Includes Value-Added Tax (VAT), Consumption Tax, and Business Tax. Primarily applicable in production, circulation, or service industries.
● Resource Tax Category: Includes Resource Tax and Urban Land Use Tax. Primarily applicable in the income generated from the development and utilization of natural resources.
● Income Tax Category: Includes Corporate Income Tax, Income Tax of Foreign-Invested Enterprises and Foreign Enterprises, and Individual Income Tax. Primarily applicable to the profits of production and operation and the net income of individuals.
● Specific Purpose Tax Category: Includes Investment Direction Adjustment Tax (now abolished), Banquet Tax, Urban Maintenance and Construction Tax, Land Value Appreciation Tax, Vehicle Purchase Tax, and Land Occupation Tax. Primarily applicable to specific targets and behaviors.
● Property and Behavior Tax Category: Includes Real Estate Tax, Urban Real Estate Tax, Vehicle and Vessel Use Tax, Vehicle and Vessel Use Plate Tax, Stamp Duty, Slaughter Tax, and Deed Tax. Primarily applicable to certain properties and behaviors.
● Agricultural Tax Category: Includes Agricultural Tax and Pastoral Tax. Primarily levied on enterprises and individuals that earn agricultural or pastoral income.
● Customs Duty: Primarily levied on goods and items entering or exiting the territory of the People's Republic of China.
The current tax rates in our country mainly include the following types:
● Proportional Tax Rate: The same tax rate is applied to the same taxable subject, regardless of the amount. VAT, Business Tax, Resource Tax, and Corporate Income Tax in our country adopt proportional tax rates.
● Excess Progressive Tax Rate: The taxable subject is divided into several grades based on the amount, with each grade having a different tax rate. The tax rates increase progressively, but the taxable subject of each taxpayer is calculated using multiple tax rates corresponding to their grade, and the results are summed to determine the total tax liability. Currently, this rate is applicable to Individual Income Tax.
● Fixed Tax Rate: A fixed tax amount is directly stipulated based on the calculation unit of the taxable subject. Currently, this rate is used for Resource Tax and Vehicle and Vessel Use Tax.
● Progressive Tax Rate Based on Relative Ratio: Several grade intervals are divided based on the relative ratio of the taxable subject amount, with corresponding differential tax rates for each interval. If the relative ratio exceeds a certain interval, the excess portion is taxed at the higher rate. Currently, this rate is used for Land Value Appreciation Tax.
Currently, taxation in our country is managed by various systems such as the finance, taxation, and customs authorities. Among the 24 tax types mentioned above, customs duties are managed by the customs authority, while other tax types are managed by tax authorities. Before 1996, agricultural tax, pastoral tax, land occupation tax, and deed tax were managed by financial authorities, but after 1996, they were transferred to tax authorities (though some provinces and cities still manage them through financial authorities).
● State Taxation Administration System: Responsible for collecting and managing the following items: VAT, Consumption Tax, Vehicle Purchase Tax, Business Tax, Income Tax, Urban Maintenance and Construction Tax paid by railway departments, head offices of banks, and insurance companies, Income Tax paid by central enterprises, Income Tax paid by joint ventures and shareholding enterprises formed by central and local enterprises and public institutions, Resource Tax, Income Tax of Foreign-Invested Enterprises and Foreign Enterprises, Securities Trading Tax (previously Stamp Duty on securities trading before its introduction), part of Individual Income Tax on savings interest income, and penalties, surcharges, and fines for central taxes.
● Local Taxation Administration System: Responsible for collecting and managing the following items: Business Tax, Urban Maintenance and Construction Tax (excluding parts managed by the State Taxation Administration System), Income Tax paid by local state-owned enterprises, collective enterprises, and private enterprises, part of Individual Income Tax (excluding savings interest income), Resource Tax, Urban Land Use Tax, Land Occupation Tax, Land Value Appreciation Tax, Real Estate Tax, Urban Real Estate Tax, Vehicle and Vessel Use Tax, Vehicle and Vessel Use Plate Tax, Stamp Duty, Deed Tax, Slaughter Tax, Banquet Tax, Agricultural Tax, Pastoral Tax, and local surcharges, as well as penalties, surcharges, and fines for local taxes. In most regions, agricultural tax, pastoral tax, and local surcharges, deed tax, and land occupation tax are now collected and managed by local finance departments.
● Customs System: Responsible for collecting and managing customs duties and import duties on personal and postal items. Additionally, it is responsible for collecting VAT and Consumption Tax at import and export stages.
3.4 Scope of Taxation
The scope of taxation for Business Tax refers to the provision of taxable services, transfer of intangible assets, or sale of real estate within the territory of the People's Republic of China.
● Meaning of "Within the Territory of the People's Republic of China": Refers to the provision of taxable services, transfer of intangible assets, or sale of real estate under the following conditions:
(1) The taxable services are provided within the territory, meaning the use and consumption of the services occur within the territory.
(2) Transporting passengers or goods out of the territory.
(3) Organizing outbound tourism within the territory.
(4) The intangible assets are used within the territory. "Use" includes applying the intangible assets to production and operation activities, transferring them, or allowing the transferee to use them for other purposes.
(5) The real estate is located within the territory.
(6) Insurance services provided by domestic insurance institutions within the territory, excluding insurance services for export goods and export credit insurance. "Domestic insurance institutions" refer to all insurance institutions located within the territory of the People's Republic of China, including domestic, foreign, and joint-venture insurance institutions.
(7) Insurance services provided by foreign insurance institutions with domestic assets as the subject.
● Meaning of "Providing Taxable Services, Transferring Intangible Assets, or Selling Real Estate": Refers to the provision of taxable services, the transfer of ownership or use rights of intangible assets, or the transfer of ownership of real estate on a paid basis. "Paid" means obtaining money, goods, or other economic benefits from the recipient (purchaser). Additionally, the act of selling newly constructed buildings by units or individuals is treated as providing taxable services; transferring limited or perpetual use rights of real estate, as well as the act of donating real estate to others without payment by units, are treated as selling real estate. However, employees hired by unit or individual operators to provide taxable services for their own unit or employer are excluded.
7.3 Calculation of Individual Income Tax
The calculation of Individual Income Tax varies based on different regulations.
Tax Liability = Taxable Income × Applicable Tax Rate - Quick Deduction
7.3.1 Calculation of Salary and Wages Income
Salary and wages income is the balance after deducting a fixed expense of 800 yuan per month from the monthly income of an individual. However, for taxpayers who earn salary and wages income within the territory of the People's Republic of China but do not have a permanent residence, or for taxpayers with permanent residence in the territory of the People's Republic of China who earn salary and wages income outside the territory, the tax law stipulates an additional deduction of 3,200 yuan as the taxable income.
7.3.2 Calculation of Income from Production and Operation of Individual Industrial and Commercial Households
For individual industrial and commercial households engaged in production and operation, their taxable income is the balance after deducting costs, expenses, and losses from the total income of the tax year. The calculation formula is:
Taxable Income = Total Income - (Costs, Expenses, and Losses)
7.3.3 Calculation of Income from Contracting or Leasing Operations of Enterprises and Institutions
Income from contracting or leasing operations of enterprises and institutions is subject to a five-grade excess progressive tax rate, with the tax liability calculated based on the applicable tax rate. The calculation formula is:
Tax Liability = Taxable Income × Applicable Tax Rate - Quick Deduction
The "Taxable Income" in the formula refers to the balance after deducting necessary expenses from the total income of the taxpayer in the tax year. The tax law stipulates that "necessary expenses" are deducted at a rate of 800 yuan per month.
7.3.4 Calculation of Income from Labor Services
Income from labor services is subject to a 20% proportional tax rate, with the calculation formula for tax liability being:
Tax Liability = Taxable Income × Applicable Tax Rate
The "Taxable Income" in the formula refers to the balance after deducting specified expenses from the income earned by the taxpayer each time. For income not exceeding 4,000 yuan per time, a fixed deduction of 800 yuan is applied; for income exceeding 4,000 yuan per time, a deduction of 20% of the income is applied.
7.3.5 Calculation of Income from Author's Rights
Income from author's rights is subject to a 20% proportional tax rate, with a 30% reduction on the tax liability. The calculation formula is:
Tax Liability = Taxable Income × Applicable Tax Rate × (1 - 30%)
The "Taxable Income" in the formula refers to the balance after deducting specified expenses from the income earned by the taxpayer each time. For income not exceeding 4,000 yuan per time, a fixed deduction of 800 yuan is applied; for income exceeding 4,000 yuan per time, a deduction of 20% of the income is applied.