Understanding China’s Turnover Tax System

Figuring Out How Much Tax Your Company Needs to Pay or Can Save in China

Getting to grips with China’s tax system is not straightforward. It is essential that SMEs understand how the system works, to make the best use of it, not only to save tax costs, but also to avoid penalties for non-compliance.

This 39-page guide will take you through the different turnover taxes in China, highlighting the relevant taxes for your industry sector and providing useful formulae to calculate accurately VAT and Consumption tax relevant to trading with China, cross-border services, including all you need to know about the important VAT system such as significant changes caused by the VAT reform applied nationwide from May 1st 2016, exemptions, deductions, refunds and withholding mechanisms.

The practical steps in the guide show the procedures and timeframes for VAT fapiao application process.

Learn in one guide how to understand tax levels across different sectors in China and find out which rates apply to your business.

Especially beneficial to small business owners, export managers, cooperatives, online retailers, distributors and brand owners.

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View the contents table and bio of responsible Centre experts below. For the full guide, click the cart and follow instructions for payment via PayPal, or credit card.

Contents China’s VAT System

• Scope of VAT
• VAT Taxpayer
• VAT Rates
• Calculation of VAT
• Deemed Sales and Inter-branch Transfer of Goods
• Concurrent Sales and Mixed Sales
• China VAT Invoice System
• New VAT vs. Old Business Tax for New Pilot Taxpayers
• Tax Calculation Basis
• A Comparison between the Old and New Rates for New Pilot Taxpayers
• Special VAT Rules on Construction and Real Estate Sectors

Consumption Tax (CT) in China

• Scope of CT
• CT Taxpayer
• CT Tax Rates
• Calculation of CT
• Exemption of CT

Turnover Tax Refund on Exportation

• VAT Refund on Exported Goods and Services
• “Exemption, Deduction and Refund” Methods
• Examples of Export Refund
• VAT Refund Procedures
• CT Refund on Exported Goods
• VAT Zero-rating and Exemption on Cross-border Services and Intangible Assets

Withholding Mechanism

• VAT Withholding Agent
• Withholding Tax Procedures

Special Topic – Representative Office (RO) Special Customs Supervision Zones and Processing Trade

• Special Customs Supervision Zones
• Processing Trade

Turnover Tax Filing Period and Non-compliance Consequences About the Centre’s Experts

Helen Ju, Senior Legal Consultant, EU SME Centre

Helen provides legal advice on various aspects of economic cooperation between Europe and China to EU SMEs looking to establish in the Chinese market.

Before joining EU SME Centre, Helen worked as a lawyer for over seven years specialising in foreign direct investment, general corporate and commercial laws, and tax law etc. Among others, she provided full legal support to clients from Europe, the US and Singapore, advising on the feasibility of their proposed transaction models and compliance of the models with PRC regulations, issuing legal opinion and advice, and drafting and reviewing legal documents. She also has five years’ experience with an export and import company. Helen has gained broad knowledge and rich experience especially in company law, labour law, contract law, tax law and social insurance law.

Ludmila Hyklova, Legal Advisor, EU SME Centre

Ludmila has been involved in legal consulting on international investment and cooperation for more than 17 years. She is now in charge of providing legal advice on foreign investment and import to China to European SMEs looking to establish themselves in the Chinese market.

After working as legal counsellor for multinational corporations, international organisations and projects in Europe, Ludmila Hyklova spent several years in China working for a European financial group, where she managed the legal and compliance department during its business start-up and later during its business development. She acquired broad knowledge and experience especially in foreign investment law, company and contract law, labour law, and tax law.

This report was published during the EU SME Centre in China Phase II (2014-2020), which was funded by the European Union (ICI+/2014/346-276).

The report was drafted in collaboration with external creators, who worked under service agreements with the Consortium running the EU SME Centre Phase II. The copyrights and intellectual property of this publication belong to the Consortium partner China-Britain Business Council. The latter was authorised by and acted on behalf of the Consortium running EU SME Centre in China Phase II. The China-Britain Business Council, which is currently part of the Consortium running the EU SME Centre in China Phase III, has granted the rights of use of this report to the current Consortium. The report is therefore re-published and made available during the EU SME Centre Phase III.

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