OVERVIEW OF CHINA'S CURRENT TAX SYSTEM
Enterprise Income Tax

(1) Taxpayers

The taxpayers of Enterprise Income Tax include any state-owned enterprise, collective enterprise, private enterprise, joint operation enterprise, joint equity enterprise, and other organizations.

(2) Tax base

The taxpayers' world-wide income from production and business operations and from other sources shall be subject to Enterprise Income Tax according to law. The Enterprise Income Tax is computed on the basis of the taxable income which is equal to the total income earned by the taxpayers in a tax year less allowable deductions for the same tax year.

(3) Tax rates and computation of tax payable

Normally, the amount of Enterprise Income Tax payable is computed on the basis of the taxable income and by applying the rate of 33%. The formula for computing the tax payable is:

Income tax payable= Taxable income × 33%
Besides the statutory rate, two lower rates of 18% and 27% are designed for some less profitable enterprises.

(4) Major tax exemptions and reductions

a. Enterprises operating in autonomous regions requesting for preferential treatment and incentives may be, upon the approval of the People's Government at provincial level, given tax reductions or exemptions for a specified period;

b. Tax exemption or tax reduction may be granted to enterprises or businesses that meet the relevant rules of the State, such as high-technology enterprises and enterprises engaged in tertiary industry set up in line with the relevant regulations of the State, enterprises using wastes as their key raw materials, newly-registered enterprises located in the revolutionary base areas, minority nationality areas, remote areas and poor areas approved by the State, enterprises-suffering from serious natural disasters, newly-registered service enterprises providing social employment opportunities, factories and farms run by schools under the educational administration departments, welfare production enterprises belonging to the civil administration departments, township enterprises, State-owned agricultural enterprises, etc..

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