1.Corporate income tax and local income tax

The foreign-invested enterprises and the manufacturing and business establishments set up by foreign enterprises within the territory of China shall pay corporate income tax at a tax rate of 30% and pay local income tax at a tax rate of 3% based on taxable income.

The manufacturing enterprises involving foreign investment in Zhongshan may pay corporate income tax at a reduced tax rate of 24%.

The manufacturing enterprises with foreign investment in Zhongshan which invest in technology-intensive or knowledge-intensive projects or the ones of energy, communication and port construction with investment amount of over USD 30 million and long investment recovery period may pay corporate income tax at a reduced tax rate of 15% after the approval of State Administration of Taxation.

The manufacturing enterprises involving foreign investment with operation tenure of over 10 years enjoy 2 years of corporate income tax exemption from the first profit making year and half reduction for the next 3 years. During the period of exemption and reduction of corporate income tax, local income tax is exempted simultaneously.

The enterprises using advanced technology are entitled to half exemption of corporate income tax for a 3-year extension should they be still technologically advanced at the expiration of specified tax exemption and reduction period. When the foreign party of the foreign-invested enterprise uses its profit for reinvestment and to increase its registered capital or branches out for new businesses for at least 5 years, it can have a rebate of 40% of the income tax already levied on the added amount at the taxation department＇s  approval of the investor ＇s application.  Total refund is applied to cases of direct investment for setting up or expanding export businesses or technologically advanced companies. The foreign-invested enterprises established in National Torch High-tech Industrial Development Zone of Zhongshan and appraised as high-tech enterprises may pay corporate income tax at a reduced tax rate of 15%.

Certified hi-tech enterprises or enterprises manufacturing hi-tech products may use such expenditures to claim a rebate on the administrative charges as ones for research and development of new products, technology and techniques, including all relevant costs for new product design, process flow formulation, equipment adjustment, raw materials, semi-finished products test, technical books and data, mid-test without the state plan, researchers' wages, facilities' depreciation and so on. And if the expenditure for such research and development of new products, technology and techniques is increased by over 10% each year, 50% of such expenditure  may further be made a rebate on the income tax (referring to the regulations of the tax authority for details).

The annual loss incurred by the foreign-invested enterprise can be compensated by the profit to be derived from the following tax year. This process can go on within a maximum period of 5 years.    

Export companies at the expiration of specified tax exemption and reduction period may enjoy half exemption of enterprise income tax provided that the annual export volume accounts for 70% the total annual industrial output or above.

For any enterprise with foreign investment which engages in the encouraged category of projects in the Catalogue for the Guidance of Foreign Investment Industries approved by the State Council and meets any of the following conditions, the investor may, with regard to the proceeds from investment items increased other than the original contract, separately calculate and enjoy the regularly reduced or exempted enterprise income tax preferences provided for in Paragraphs 1 and 2 of Article 8 of the tax law: (1) the newly increased amount of registered capital due to the increase of investment is no less than USD 60 million; (2) the newly increased amount of registered capital due to the increase of investment is no less than USD 15 million, and also no less than 50% of the enterprise' original registered capital.

2. Value Added Tax (VAT), Consumption Tax, Business Tax, Resource Duty and Customs Duty in regard to Foreign-invested Enterprises

(1) VAT: VAT is levied on tangible movable goods sold within China or on services of processing, repairs and assembly as well as imported movable goods. The VAT rate is divided into three grades. The basic VAT rate is 17%. The VAT of lower level is 13%. Unless otherwise specified by the State Council, the policy of tax rebate is applicable to exported goods.

If the homemade equipment purchased by foreign-invested enterprises within the total investment falls into the catalogue of duty-free equipment, the VAT for such homemade equipment can be fully refunded.

(2) Consumption tax: Consumption tax is levied on 11 kinds of taxable consumption goods listed in the tax law which are produced at home, processed by contract or imported, such as cigarettes, wines, cosmetics, cars, etc.(3) Business tax: Business tax is a kind of tax levied according to business turnover on the entities and individuals that provide paid services and labor related to communication and transportation, building industry, finance and insurance, post and telecommunication, cultural and sports undertakings, entertainment business and service sector within the territory of the People's Republic of China, transfer of intangible assets, and sales of real estate. The tax rate is divided into three grades, i.e., 3%, 5% and 10%.

(4) Resources duty: Resources tax is a kind of tax levied on the entities and individuals that exploit taxable mineral products or produce salt within the territory of the People's Republic of China.

(5) Customs duty: Chinese customs levies on import and export goods in accordance with the Customs Law and the Import and Export Rules of the Customs of the People's Republic of China on Imports and Exports. As for import and export duties, a tariff rate table is formulated based on a classified catalogue of commodities. The import duty rate is divided into ordinary duty rate and preferential duty rate. Ordinary duty rate is applicable to the imported goods originating from the countries or areas with which China has not entered into agreement on reciprocal tariff. Preferential duty rate is applicable to the imported goods originated from the countries or areas with which China has entered into agreement on reciprocal tariff. At present, the tax calculation methods used in China include ad valorem tax, specific duties, compound duties and sliding scale duties. Apart from import and export duties, the Customs also levies import VAT and consumption tax on taxable imported goods on behalf of the tax authority in accordance with the provisions of Provisional Regulations of the People's Republic of China on VAT and Provisional Regulations of the People's Republic of China on Consumption Tax.

3. Other types of taxes

(1) Personal income tax: This is a kind of tax levied on individuals (including Chinese citizens, self-employed individuals, overseas Chinese, compatriots from Hong Kong, Macao and Taiwan and foreign individuals) for all their taxable incomes. Entities or individuals shall withhold on behalf of tax authority the personal income tax according to the regulations of tax law when paying taxable income to individuals (whether being registered personnel of the unit or not).

(2) Land VAT: This is a tax levied on the entities and individuals who obtain added value from the paid transfer of the use right of state-owned land, buildings on the ground and their attachments.(3) Stamp Duty: This is a kind of tax levied on the formations, issue and reception of vouchers during the economic activities and intercourse.

(4)  Urban real estate duty: This is a tax levied on the owners of property right according to the taxable value of houses or the rental income of leased houses with the real estate as the object of taxation.

(5) License duty for vehicles and vessels: This is a tax levied on the owners or users of vehicles and vessels running on public roads, rivers and seas within the territory of the People Republic of China.