The company is subject to tax. Branch offices are not regarded as independent taxpayers, even if they keep independent accounts. Their tax burden must be borne by the head office.

In some regions, the tax burden is allocated according to three factors: the company’s income, employee salaries, and total assets. Branch offices must pay their respective shares to the local tax authority.

The scope of tax liability depends on the entity’s tax residency status. A “Tax Resident Enterprise” (TRE) is a company established under Chinese law, or a foreign company whose place of effective management is located in the People’s Republic of China. A TRE is subject to Chinese corporate income tax on its worldwide income.

A “Non Tax Resident Enterprise” (Non-TRE) is a company that does not meet the criteria mentioned above. In this case, only the income earned in China is subject to Chinese corporate income tax.

The general corporate income tax rate is 25%, which is the same rate as in Austria.

Corporate income tax is an annual tax. However, tax prepayments must be made monthly or quarterly (as determined by the locally competent tax authority) by the 15th of the following month.

The annual tax return must be filed by 31 May of the following year at the latest. The various types of tax are paid at the locally competent office of the State Administration of Taxation (SAT).

Some companies (for example, high-tech companies) are subject to partially reduced tax rates, provided they meet certain criteria.

Foreign companies without a permanent establishment in China must pay tax in China on income from Chinese sources, in particular:

• Income from the provision of services,
• Dividends,
• Interest,
• Rental income,
• Royalties, and
• Capital gains.

The withholding tax rate is 20%, but has been reduced to 10% through implementing regulations (excluding income from the provision of services). In addition, double taxation agreements may reduce the rate to below 10%.

Service contracts for legal transactions (for example, between an Austrian and a Chinese company) must be submitted to the tax authorities for documentation purposes within 30 days of the contract being signed. The withholding tax must be withheld by the paying company (or organization) in China (the “Withholding Agent”).

Typical cases in which withholding tax applies:

• Provision of services
• Distribution of profits from company shares
• Interest
• Royalties
• Know-how

As a general rule, individuals who are domiciled in the People’s Republic of China are subject to unlimited individual income tax on their worldwide income.

For foreigners (as well as persons from Hong Kong and Macau) who work in China only for a limited period, the Chinese authorities assume that they do not have a permanent domicile in China. For these individuals, taxation depends on the length of their stay in China and the source of their income. This is further defined by the concept of tax residency introduced in the new Individual Income Tax Law.

Individuals who do not have a permanent domicile in China and who spend fewer than 183 days in China during a tax year are considered non-tax-resident. In this case, only income earned in China is subject to tax in China.

Individuals who spend more than 183 days in China during a year are considered tax resident, even if they receive their salary from abroad and do not have a permanent domicile in China.

• Anyone who spends more than 183 days in China in each of up to six consecutive years only needs to pay individual income tax on income received from individuals, partnerships, companies, and other economic organizations within China.
• From the beginning of the 7th year of residence in China, an individual is subject to unlimited tax on worldwide income, unless they spend more than 30 consecutive days abroad by the end of the 6th year of residence at the latest. In this case, a new six-year period begins.

Income from wages and salaries is taxed at a progressive rate of 3% to 45%. The monthly basic allowance for all tax-resident individuals is RMB 5,000. The tax rate and additional allowance are variable and are as follows:

In principle, the tax applies to all entities and individuals that sell goods, services, intangible assets, and real estate domestically, or that import goods.

The system distinguishes between two types of taxpayers:

• General Taxpayers: These apply the general calculation method, may issue special VAT invoices, and are entitled to input tax deduction.
• Small-Scale Taxpayers: These use a simplified calculation method and pay the tax directly by multiplying turnover by a levy rate of 3%. Input tax deduction is not possible in this case.

The VAT law retains the three existing basic tax rates and sets the levy rate for the simplified taxation method by statute.

Consumption taxes are levied on so-called luxury goods, alcohol and tobacco, as well as goods that tend to be environmentally harmful. These include in particular:

• Cigarettes,
• Spirits,
• Cosmetics,
• Luxury jewelry,
• Fireworks, refined oil,
• Tires,
• Motorcycles,
• Cars,
• Golf equipment,
• Luxury watches,
• Yachts,
• Disposable wooden chopsticks, and
• Solid wood flooring.

The tax rates are either percentage-based or value-based, and therefore vary considerably. For example, small cars are taxed at 1%, while Class A cigarettes are taxed at 56%.

Consumption taxes are paid by the manufacturers of these goods and added to the product price.

Trade, as an intermediate stage in the sales process, is not affected. Exports are exempt from consumption tax.

Stamp duty is required for the issuance and receipt of certain documents and contracts.

The tax amounts or rates vary depending on the document. For example, for a purchase contract they amount to 0.03% of the sale price, for a lease agreement 0.1% of the rent, and for a loan agreement 0.005% of the loan amount.

In principle, for contracts the taxpayer must calculate the taxable amount themselves and affix and cancel stamp duty stamps on the document in the corresponding amount.

Care should be taken to ensure that the appropriate stamp duty stamp is affixed to all contracts and documents subject to stamp duty.

The penalties for non-compliance far exceed the tax obligations themselves. In the event of tax evasion, not only is the original tax plus a late-payment surcharge reclaimed. In addition, a fine of 50% to five times the amount of tax evaded may be imposed. In serious cases, imprisonment may even be threatened.
Last updated: 04.08.2026