What is the income tax levied on resident enterprises?
Generally the national income tax on FIEs and FIEs with establishments is levied at 30% while local income tax is 3 % on the net taxable profit. FIEs are eligible for various tax holidays and other tax reductions and exemptions under the tax law, depending on their locations and nature of operations.
The following are the preferential income tax rates for income derived from production and non-production operations carried on by FIEs and FIEs located in various special tax regimes:
- Income from production or non-production businesses obtained by FIEs and FEs with establishments located in Special Economic Zones (SEZ) in Shenzhen, Zhuhai, Shantou, Xiamen and Hainan is subject to tax at 15%.
- Income from production businesses obtained by FIEs located in the designated Economic and Technological Development Zones (ETDZ) is also subject to tax at 15%.
- Income obtained by FIEs located in Coastal Economic Open Zones (CEOZ) and in the old urban districts of cities where the SEZs or ETDZs are located, and are engaged in production operations, is subject to tax at 24%.
- Income obtained by FIEs located in Coastal Economic Open Zones and in the old urban districts of cities where the SEZs and ETDZs are located, and are engaged in the following projects, is subject to tax at 15%:
- Technology-intensive or knowledge-intensive projects;
- Projects with a long investment return period with foreign investment of not less than US$30 million; and
- Energy, communication or port development projects.
- Income obtained by FIEs located in Shanghai Pudong New Area and engaged in productive operations, energy and transportation construction projects is subject to tax at 15%.
- Financial institutions, such as foreign bank branches and Sino-foreign joint venture banks established in SEZs and other areas approved by the State Council, are subject to tax at 15% if the registered capital from the foreign investor or operating fun transferred from the foreign head office is over US$10 million and the operation period is longer than 10 years. This applies to foreign currency business only. For renminbi currency business the normal income tax rate will continue to apply.
- Enterprises located in certain free trade zones and export processing zones and in certain Western and Central areas may also be subject to a 15% reduced income tax rate.