Core answer: A Chinese company typically faces four recurring taxes: VAT (增值税, 13%/9%/6% or small-scale 1–3%), corporate income tax (企业所得税, 25% standard — 5% effective for qualifying small enterprises on the first ¥3M profit), surcharges (城建税+教育附加, ~12% of the VAT paid), and stamp duty (印花税, 0.03–0.1% on contracts). A profitable ¥10M-revenue company commonly pays 8–15% of revenue in total taxes depending on margin and input credits.
The four pillars
| Tax | Base | Standard rate | Small-business relief |
|---|---|---|---|
| VAT | net sales − inputs | 13/9/6% | small-scale 1% (2027) |
| Surcharges | VAT actually paid | ~12% of VAT | 六税两费 half reduction |
| Corporate income tax | taxable profit | 25% | 小型微利: 5% effective ≤¥3M |
| Stamp duty | contract amounts | 0.03–0.1% | half reduction |
小型微利企业 (small low-profit): staff ≤300, assets ≤¥50M, annual profit ≤¥3M → the first ¥3M of profit taxes at an effective 5% (25% × 20%).
Worked examples
Example 1 — Trading company. Revenue ¥10M (net), inputs ¥7M creditable, profit ¥1M. VAT = 1,000×13% − 700×13%... precisely: output 1,300k − input 910k = ¥390k; surcharges ≈ ¥47k; CIT at 5% (qualifies) = ¥50k; stamp ≈ ¥5k. Total ≈ ¥492k ≈ 4.9% of revenue.
Example 2 — Consulting firm. Revenue ¥3M, almost no inputs, profit ¥1.5M. VAT at 6% = ¥180k (few credits); surcharges ¥22k; CIT 5% = ¥75k. Total ≈ ¥277k ≈ 9.2%. Service firms feel VAT more than traders because labor has no input invoice.
Example 3 — The bracket cliff. Profit ¥3.0M → CIT ¥150k. Profit ¥3.01M → no longer 小型微利 → CIT = 3.01M × 25% = ¥752k. Earning ¥10k more costs ¥600k — year-end planning (deferring revenue, accelerating deductible costs, lawful benefits) around this line is the highest-ROI hour in Chinese tax planning.
Example 4 — Losses carry forward. A ¥2M loss offsets future profits for 5 years (10 for high-tech enterprises) — track them; acquired companies' losses have restrictions.
Common mistakes and myths
- Revenue ≠ taxable income — CIT taxes profit after deductible costs; the deductions list (and its caps: entertainment 60% up to 0.5% of revenue, ads 15%…) is where tax lives or dies.
- Forgetting surcharges — they're small (12% of VAT) but automatic; budgeting VAT only understates the bill.
- No invoices, no deduction — costs without compliant 发票 are taxed as if they never happened; "cheaper without invoice" usually costs more after the 25% CIT effect.
- Mixing shareholder and company money — random transfers create deemed-dividend (20% tax) and audit exposure; use salary, dividends, or loans with documentation.
- Ignoring preferential regimes — high-tech (15%), western-region encouraged industries (15%), R&D super-deduction (+100% of R&D spend): qualifying is paperwork, not luck.