Tax in China

Who is the tax authority?

The State Taxation Administration (国家税务总局, STA) is China's central tax authority. STA operates directly under the State Council. Provincial-level STAs administer locally within the unified vertical hierarchy established by the 2018 institutional reform.

STA administers Individual Income Tax (IIT / 个人所得税), Enterprise Income Tax (EIT / 企业所得税), Value-Added Tax (VAT / 增值税), consumption tax, customs duties, stamp tax, and the urban land use tax framework. Taxpayer-facing portals are the Natural Person Electronic Tax Bureau (自然人电子税务局) for individuals and the Electronic Tax Bureau (电子税务局) for companies.

STA publishes guidance through Cai Shui (财税) circulars, Guo Shui Fa (国税发) notices, and Public Announcements. Audit and dispute-resolution proceedings run at the provincial or prefectural bureau level.

What is the tax year and when are returns due?

China's tax year for individuals is the calendar year (1 January to 31 December). Employers withhold IIT monthly using the cumulative withholding method introduced in the 2018 reform. The annual IIT reconciliation (汇算清缴) window runs 1 March to 30 June of the following year.

Corporate Enterprise Income Tax follows quarterly provisional filings due within 15 days after each quarter end, with the annual settlement due by 31 May. VAT is filed monthly or quarterly depending on the taxpayer's general versus small-scale classification.

Late filing or payment triggers a daily surcharge of 0.05% on unpaid tax — roughly 18.25% annualised — under the Tax Collection and Administration Law.

How is China tax residency determined?

An individual becomes a Chinese tax resident under two tests in the 2018 IIT Law. Domicile-based residents — Chinese nationals with continuing China ties and a home to which they intend to return — are residents from day one. Non-domiciled individuals become residents if physically present 183 or more days in a calendar year.

Residents are taxed on worldwide income. Non-residents are taxed only on China-source income. The six-year rule offers relief for non-domiciled residents: foreign-source income may be exempt for the first six consecutive residency years provided the individual either spends fewer than 183 days in China in any of those years, or takes a single trip of more than 30 consecutive days outside China. Any year that fails both conditions ends the exemption window permanently.

The 2018 IIT reform added an exit-tax mechanism for individuals relinquishing Chinese household registration (户籍). A final IIT return and full tax settlement must be filed before the registration cancellation is approved. High-net-worth Chinese citizens emigrating face increased STA scrutiny on offshore-asset disclosure under CRS coordination.

What are the personal income tax rates?

China's 2018 IIT reform consolidated wages, labour-service remuneration, author's remuneration, and royalties into a single Comprehensive Income (综合所得) taxed at a seven-bracket progressive schedule:

The standard basic deduction is CNY 60,000 per year (CNY 5,000 per month). Six categories of itemised special-additional deductions apply: child education, continuing education, serious-illness medical expenses, first-home mortgage interest, rent, and elderly support.

Business income from individual industrial-commercial households or sole proprietorships is taxed under a separate five-bracket schedule of 5%, 10%, 20%, 30%, and 35%. Capital gains, dividends, interest, rental income, and most other passive categories are taxed at a flat 20%.

How does Enterprise Income Tax work?

China's Enterprise Income Tax (EIT / 企业所得税) is levied at 25% standard under the CIT Law of 2007. Several reduced rates apply to qualifying entities:

Resident enterprises are taxed on worldwide income, with a foreign-tax credit available. Non-resident enterprises without a permanent establishment in China face 10% withholding on China-source income (reduced under applicable treaty). Manufacturing R&D super-deductions are available — qualifying R&D expenses are deductible at 200% for most sectors.

Special economic zone frameworks (Hainan Free Trade Port, Greater Bay Area cities, other pilot zones) layer additional preferential rates for qualifying activities.

How does VAT work?

China's VAT (增值税) fully replaced the prior Business Tax (营业税) following the 2016 nationwide rollout. VAT operates through the Golden Tax System (金税工程), a centralised electronic-invoicing infrastructure. Fully-electronic invoicing (全面数字化电子发票) rolled out nationally in 2024–2025.

Special VAT invoices (增值税专用发票) are required for B2B input-tax credit. Ordinary VAT invoices (普通发票) cover B2C and non-creditable transactions. Consumption tax (消费税) applies on top of VAT for tobacco, alcohol, refined oil, passenger cars, watches above CNY 10,000, jewellery, golf equipment, and certain other items.

How are cryptoassets treated?

Pre-2021 cryptocurrency holdings retained by individuals are theoretically subject to 20% IIT on disposal under the 'income from property transfer' category. STA enforcement is selective and the practical compliance landscape unclear.

One Country, Two Systems — separate tax jurisdictions

What is the treaty network?

China maintains approximately 110+ active bilateral income tax treaties — one of the world's largest networks. Treaties are negotiated by STA, finalised by the Ministry of Foreign Affairs, and generally follow the OECD or UN Model with PRC reservations. China's MLI entered into force 1 September 2018 with the Principal Purpose Test (PPT) and simplified Limitation on Benefits (LOB) provisions adopted.

The US–China treaty, signed in 1984 and entered into force in 1985, remains in force despite ongoing trade and geopolitical tensions. The treaty covers dividends, interest, royalties, and income from employment, providing reduced withholding rates for qualifying residents of each country.

The Mainland China–Hong Kong Comprehensive Arrangement operates as a bilateral treaty within one sovereign state, with 5% dividend withholding, 7% interest withholding, and 7% royalty withholding for qualifying flows. China is a Qualified Domestic Minimum Top-up Tax jurisdiction under Pillar Two.

Where does China sit in the Asia-Pacific G20 cohort?

China anchors the Asia-Pacific G20 worldwide-income cohort alongside Japan, South Korea, India, and Australia. The broader Asia-Pacific tax landscape splits into 5 distinct archetypes:

Currency and cross-border framework

Common pitfalls and penalties

Foreign companies and individuals operating in China encounter a predictable set of traps:

When should you talk to a China tax pro?

Some situations can be handled through STA's Electronic Tax Bureau portals. Others involve complexity that warrants professional input:

Situations where professional input is especially valuable include:

• Your income includes equity incentives (RSU vesting, ESPP discounts, stock-option exercises) — these are a frequent source of misclassification under IIT
• You are non-domiciled and need to document the six-year rule or manage an exit year
• Your company holds HNTE certification and needs to assess Pillar Two top-up exposure
• You conduct cross-border work between mainland China and Hong Kong under the Greater Bay Area or similar arrangements
• You received an STA audit letter, a notice of assessment, or a MAP-related enquiry
• Your business transacts under the Golden Tax System and has outstanding VAT invoice reconciliation issues
• You hold offshore financial assets and received a CRS-related STA enquiry
• You are emigrating from China and need to complete the household-registration exit-tax process

Find vetted China practitioners in the directory below.

This page is general information. It is not personal guidance for your specific situation. Tax rules change — China's IIT framework, EIT incentive schedules, and Pillar Two provisions are under active legislative development. Always check current figures on the STA website (chinatax.gov.cn) or with a licensed China practitioner before filing.