Corporate Establishment, Tax, Accounting & Payroll Throughout Asia. Tax Rates in China, Hong Kong, India and Vietnam

Transcription

1 Corporate Establishment, Tax, Accounting & Payroll Throughout Asia Tax Rates in China,, and

2 Welcome to Dezan Shira & Associates and to the emerging Asia markets of China,, and. With 17 years of experience in the region, our firm is one of the very few cross-border practices operating in emerging Asia. The countries we work in are evolving rapidly and so are the legal and tax environments there. As a professional services firm, Dezan Shira & Associates combines both business advisory and tax disciplines under one roof. Add to this our extensive, local knowledge of each of the markets we operate in, and we are able to provide a uniquely strong platform to help our clients take their businesses forward. Do you want to do business in Asia? Whether you already have a presence in Asia or are new to this fascinating market, this guide will be a practical introduction to the tax systems in China,, and. Our expertise in this area is just one aspect of the specialized business adviosry and tax services that our team of experts on the ground in offices throughout China has to offer. We believe our resources and expertise are unmatched in Asia, and this, coupled with our dedication to client service, is the reason our practice has become the market leader it is today. Welcome to emerging Asia. Welcome to Dezan Shira & Associates. Tax Rates in China,, and A common challenge foreign investors in, China, and often face is a complex local tax system. Understanding and preparing for such tax intricacies is crucial to successful investment in these countries. This brochure will introduce the basics of taxation in each country, and the most common tax rates, so as to provide an overview for easy comparison. This brochure is not intended as a complete guide, rather, as a general introduction. For a more complete illustration, please contact the tax experts at Dezan Shira & Associates. Tax rate overview: Tax description China Standard CIT rate 25 % 16.5 % 25 % 40 % Standard VAT rate 17 % 0 % 10 % varies Dividend distribution tax 10 % 0 % 5 % 0* % Property tax 1.2 % 15 % 0 % 0 % Social security contributions varies 5 % 18 % 12 % Individual income tax 5-45 % 2-15 % 5-35 % 0-30 % * Applies only to foreign companies. n companies are taxed at the rate of 17 percent China The standard corporate income tax rate in China is 25 percent, but small and low-profit enterprises, as well as enterprises without a permanent establishment in China, enjoy a reduced rate of 20 percent. High-tech companies are considered strategically important and are only subject to 15 percent CIT rate. Chinese business tax is usually in the range of three to five percent. Value-added tax rates vary between 0 2 DEZAN SHIRA & ASSOCIATES

3 Progressive indivdual income tax rates in China RMB monthly 5 % 500-2, % 2k - 5, % 5k - 20, % 20k - 40, % 40k - 60, % 60k - 80, % 80k - 100, % above 100, % and 17 percent, and VAT regulations are complicated. Small-scale taxpayers are only subject to a rate of 3 percent. For general taxpayers, the rate is generally 17 percent. Property tax is calculated at 1.2 percent of the residual value. In this case, residual value is the original value deducted 10 to 30 percent. Income from a lease is taxed at a rate of 12 percent. Social security contribution rates vary between districts but the actual contribution is shared between the employee and the employer. In Beijing, Shanghai and Chongqing, for example, the employers burden is over 30 percent. This includes pension, medical, unemployment and injury insurance. Monthly taxable salary in excess of RMB100,000 is taxed at the rate of 45 percent. Income below this amount is taxed at lower rates. The China Tax Guide published by Asia Briefing offers an introduction to the subject. Dezan Shira & Associates can provide further details (china@dezshira.com). Progressive salary tax rates in 0-40,000 HKD yearly 2 % 40k-80,000 7 % 80k-120, % above 120k 17 % s tax system is considered favorable for international firms. According to its territorial tax principal, only income earned within is taxed. Even overseas profits brought back into Hong Kong, and dividends received from any corporation, are tax-free. Moreover, VAT is non-existent in Hong Kong. There is, however, a property tax of 15 percent and salaries are subject to social security contributions of 5 percent. There are two methods of calculating personal income tax: (1) progressive tax, taken on a sliding scale against the taxpayer s net chargeable income and (2) standard taxation at 15 percent, also based on net chargeable income. The final payable income tax is chosen from the lower of the two tax liabilities. The maximum average tax rate in is thus 15 percent. A provisional tax payment on the salary and profit tax for the upcoming year must usually be paid in full when the tax department sends a tax computation notice. Dezan Shira & Associates office can provide further details about the tax system in (hongkong@dezshira.com). Progressive personal income tax rates in Up to 5m VND monthly 5 % 5m 10m 10 % 10m - 18m 15 % 18m - 32m 20 % 32m - 52m 25 % 52m - 80m 30 % Over 80m 35 % In 2007 and 2008, instituted a more competitive tax system, closer to international standards. The standard enterprise income tax rate is 25 percent. Given supporting documents, bonuses are fully deductible, not including a 10-percent cap on advertising and promotion expenses. There are also two incentive EIT rates of 20 and 10 percent granted to projects for a period of 10 or 15 years, depending on whether the project has socio-economic or strategic relevance. The Law on Social Insurance requires employers to purchase social insurance. The payable amount is 20 percent of the employee s salary or wages, of which the employer pays 15 percent and the employee DEZAN SHIRA & ASSOCIATES 3

4 5 percent. Medical and unemployment insurance are also compulsory. The employer pays a premium of 2 percent of monthly salaries or wages for medical insurance and 1 percent for unemployment insurance. The VAT rate has three levels: 0 percent, 5 percent or 10 percent. The 0 percent rate is applicable to goods for export, while the 5 percent rate is for essential goods such as water, fertilizer, medicine, animal feeds, etc. The 10 percent rate is the relevant rate for most goods. Non-residents are taxed at a flat PIT rate of 20 percent. In the progressive system applicable to residents, the top marginal tax rate is 35 percent. It applies to monthly taxable income above VND80 million. Received dividend and interest are both taxed at a rate of 5 percent. Artucles from Briefing covers the tax system in more depth. Inquires may be directed to Dezan Shira & Associates Hanoi office (vietnam@dezshira.com). There is no property tax in, but long-term gains from sale of assets, such as property, are taxed at 20 percent, while short-term gains are taxed at normal rates. Long-term gains from securities are tax-exempt but short-term gains are taxed at 15 percent. The personal taxation system is progressive, with income below Rs.150,000 tax exempt. A surcharge of 10 percent on total tax is levied if income exceeds Rs.1 million. Dividends paid by an n company to an individual are also tax free according to domestic law. Employers and employees each contribute 12 percent of the employee s salary to the n social security scheme. This applies to international workers as well, even though they are not eligible for social security benefits. A fringe benefit tax is levied at a rate of 30 percent on fixed percentages of certain types of expenditures, such as entertainment, travel, and phone expenses. Articles from Briefing go deeper into relevant aspects of the n tax system. Dezan Shira & Associates offices in the country can also provide further information (india@dezshira.com). Progressive salary tax rates in 0-150,000 Rs yearly 150k - 300, % 300k-500, % s tax system is intricate and includes many small taxes uncommon outside of. n enterprises are to some extent subject to a smaller tax burden than foreign firms. For instance, their standard income tax rate is 30 percent, compared to 40 percent for foreign corporations. However, foreign companies are exempt from the dividend distribution tax, which taxes domestic firms at a rate of 17 percent. If net income exceeds Rs.10 million, domestic firms are subject to a surcharge of 10 percent and foreign firms are subject to a surcharge of 2.5 percent. In addition, an education tax of 3 percent is charged on the tax payable. If the net wealth exceeds Rs.1.5 million, domestic firms are subject to a wealth tax of one percent on specified assets. VAT on specified services is 10 percent. The rate for goods sold outside the state is two percent, but varies by state for goods sold within the state. 4 DEZAN SHIRA & ASSOCIATES

5 Dezan Shira & Associates Regional Offices CHINA Beijing Suite 701, East Tower Twin Towers, B-12 Jianguomenwai Avenue Beijing, Dalian Dalian Ascendas IT Park Room 304, 1 Hui Xian Yuan, Dalian HTIZ Dalian Qingdao qingdao@dezshira.com Room 2307, Building A Central International Plaza 19 Zhangzhouer Lu Qingdao, Shanghai shanghai@dezshira.com Suite Tian An Centre 338 Nanjing Xi Lu Shanghai, Hangzhou hangzhou@dezshira.com Suite 1001 Xuefeng Mansion 346 Qingtai Lu Hanghzou, Ningbo ningbo@dezshira.com Room 505 Shiji Jinmao Mansion 158 Baizhang Dong Lu Ningbo, Guangzhou guangzhou@dezshira.com Unit 1005, 10/F Tower B Center Plaza 161 Linhexi Lu Guangzhou, Shenzhen shenzhen@dezshira.com Suite 630, Diwang Commercial Building 5002 Shennan Dong Lu Shenzhen, Zhongshan zhongshan@dezshira.com Room 513, West Wing Yi Hua Commercial Center Section 3, Zhongshan Lu Zhongshan, HONG KONG hongkong@dezshira.com /F, Wharf T&T Centre Harbour City 7 Canton Road Tsimshatsui, Kowloon INDIA Delhi delhi@dezshira.com Level 15 Eros Corporate Towers Nehru Place New Delhi, Mumbai mumbai@dezshira.com Suite 303 B Wing Leo Building 24th Rd., Khar (w) Bandra Mumbai, Chennai chennai@dezshira.com Regus CitiCentre, Level 6 10/11 Dr. Radhakrishnan Salai Chennai, Bangalore bangalore@dezshira.com Level 9, Raheja Towers Mahatma Gandhi Road Bangalore, Kolkata kolkata@dezshira.com Level 6, Constantia Dr. U. N. Brahmachari Marg Kolkata, VIETNAM Hanoi hanoi@dezshira.com Rm 1028, Pacific Place 83B Ly Thuong Kiet St. Hoan Kiem District Hanoi Ho Chi Minh City hcmc@dezshira.com /F Saigon Tower 29 Le Duan St. District 1 Ho Chi Minh City