鈼?/span> Value Added Tax: VAT applies to all enterprises and individuals engaged in sales of goods, provision of processing, repairs and replacement services, and the importation of goods into China. General VAT rate is 17%, but necessities goods are taxed at 13%. VAT payable or refundable is based on output VAT (for Sales) minus input VAT (for Purchases). Generally, there is no VAT payable for export. Click More

鈼?/span> Business tax: all enterprises and individuals engaged in transportation, construction, post and telecommunications, finance and insurance, as well as transfer of immovable properties and intangible assets shall be liable for business tax. Business tax is charged on gross revenue at a rate from 3% to 20%

鈼?/span> Corporate income tax: An entity in China is subject to corporate income tax. The CIT rate is usually 25% charged on net profit. Depending the location or business of entities, the CIT rate may be reduced. Click More

鈼?/span> Individual income tax: Individuals are subject to PRC IIT on their salaries, allowances, rental income and other income at progressive tax rates ranging from 5 鈥?45% respective of 500 鈥? 100,000 RMB per month.Click More

Social insurance and pension

Social insurances and pension are mandatory, and are contributed by both employer and PRC staffs in China. There are minimum and maximum limits which are linked up with average salary levels in different locations.

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Social insurance rates are :

鈼?/span> Welfare insurance (employer 10%, staff 8%)

鈼?/span> Medical insurance (employer 8%, staff 2%)

鈼?/span> Unemployment insurance (employer 0.4%, 0)

鈼?/span> Accident insurance (employer 0.5%, 0)

The above rates are applicable in Shenzhen, these rates may vary depending on location of entities. Expatriates working in China are not required to contribute PRC social insurance and pension

Representative Office

RO the most simplest form of establishment in China. The entry requirement for representative office is very low. It requires the foreign entity to prove its legal status by public notarization of Chinese embassy or appointed agent, and to show its financial capability for establishing a representative office in China. However, the activities and operation permitted for a RO in China is very restrictive as well. It is not uncommon to find MNC to form their own RO in China to promote their products to PRC buyers, source goods from China, do market research, engage a team to carry out quality control for overseas buyers, liaise with local vendors and so on. RO is however not permitted to engage in direct business operation in China, trade of goods, earn direct income from China, and even employ its staffs directly in China.

Duration of RO is normally one year but not more than two years. Re-registration of RO is required by the expiry of duration.

Staff Employment : Since the RO by itself is not a legal entity in China, it may only engage its staffs by hiring an intermediate local employment agent, called Foreign Service Company (FESCO). It is costly to maintain a RO with many staffs employed, because the fee payable to FESCO is often based on staff per head on monthly basis. RO being the employer is required to report, withhold and pay individual income tax on behalf of its staffs.

Taxation : As RO is not allowed to do direct business in China, the taxation imposable to RO is largely computed on the operating costs incurred by RO. Tax exemption for RO only happens on very rare circumstances. The tax rates are approximately 10% on operating costs of the RO. In particular, Business Tax, Corporate Income Tax, Individual Income Tax and incidentals are due to be returned to tax authorities on monthly or quarterly basis varied on locations.

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WOFE

To contrast, a WOFE is a legalized enterprise in China, that enables it to earn direct income domestically. A WOFE can be engaged in service, trading and manufacturing sectors, provided business scope is pre-approved by the authorities. It can directly employ its own staffs as opposed to RO. A WOFE statutorily requires minimum capital investment, the amount of capital depends on the degree of business scope. Therefore, the wider the business scope, the more capital is required. Consultancy service WOFE might probably need the lowest capital requirement. In contrast, a manufacturing WOFE might need the highest capital requirement. Also, the capital requirement varies on locations in China. Bigger city or province might request more market entry requirements. To put it altogether, WOFE establishment allows more flexibility in business scope, can earn income domestically from China, if properly managed, can save operating costs as opposed to RO.

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Reasons for use of Hong Kong company

鈼?Gateway to China

鈼?Simple tax system, low tax rate

鈼?Leading financial and business hub in Asia Pacific

鈼?Internet banking and finance facilities

鈼?Transparent company information

鈼?English law system: despite under sovereign power of China, Hong Kong has its own legal system applying English laws. It is called 鈥漮ne country two systems鈥?

Requirements for setting up business in Hong Kong

鈼?Quick company formation

鈼?No capital requirement

鈼?One director and shareholder sufficient

鈼?No resident director is required

Procedures for company formation in Hong Kong

鈼?Approval of company name

鈼?Proof of director and shareholder identity

鈼?Application for business registration

鈼?Bank accounts setting up

Taxation in Hong Kong

鈼?Simple tax system: No sales tax, no capital gain tax, no interest tax, no tax for dividends income, estate duty abolished, no group relief

鈼?Exemption on offshore profits derived outside Hong Kong territory. Profit derived and sourced from overseas is not subject to tax in Hong Kong. Clearly, income derived from Mainland China is regarded as offshore income and not subject to Hong Kong tax.

鈼?Low corporate tax rate: 16.5% (2009) on net profit

鈼?Salary tax: progressive tax rates, but maximum rate not exceeding 16% on remunerations

鈼?Double tax arrangements with Mainland China is available

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E-mail:info@consultingHK.com

Room 311, Building 3, ZhongXing Industrial Zone, ChuangYe Road, NanShan District, ShenZhen City, China
Time: GMT + 8, Hong Kong and Shenzhen ICP NO.