Kaizen - China Stamp Tax, Overview of China's Current Tax System

A Wholly Foreign Owned Enterprise (WFOE) is a Limited Liability Company established in China by foreign investor(s). A WFOE is very much like a LLC in the USA that it requires one member only.
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The registration procedures of a Wholly Foreign Owned Enterprise (WFOE) could be divided into 3 phases: aproval phase, registration phase and post-establishment phase.
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A Wholly Foreign Owned Enterprise (WFOE) could be terminated by way of liquidation or deregistration by its investor(s) or when the conditions of termination in its Articles of Association occurs.
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China Taxation

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CHINA CORPORATE INCOME TAX

OVERVIEW OF CHINA'S CURRENT TAX SYSTEM
Stamp Tax

(1) Taxpayers

The taxpayers of Stamp Tax include any enterprise, unit, individual household business operators and other individual who executes or receives specified economic documents within the territory of China.

(2) Taxable items and tax rates

Table of Stamp Tax Taxable Items and Rates

Taxable items	Tax rates (tax amount)
1. purchase / sale contracts	0.03%
2. processing contracts	0.05%
3. survey arid design contracts for engineering and construction projects	0.05%
4. construction installation and engineering contracts	0.03%
5. property, leasing contracts	0.1%
6. goods transportation contracts	0.05%
7. warehousing contracts	0.1%
8. loans contracts	0.005%
9. property insurance contracts	0.1%
10. technology contracts	0.03%
11. property title transfer documents	0.05%
12. business accounting documents (1) capital recording documents (2) other accounting documents	0.05% 5 yuan/piece
13. permits and licenses	5 yuan/piece
14. stock exchange	0.4%

(3) Computation

The computation of Stamp Tax is based on the amount of payment, fees or receipts listed on the taxable documents or the number of pieces of the taxable documents by using the applicable tax rate listed in the Schedule of Stamp Tax Taxable Items and by applying the applicable tax rate or amount of tax per unit. The formula for computation is:

a. Tax payable =Amount of payment ( or fees, receipt) indicated in taxable documents × Applicable rate , or

b. Tax payable = Number of pieces of taxable documents ×Tax amount per Unit

(4) Major exemptions

Tax exemptions may be granted on duplicates or copies of documents on which Stamp Tax has already been paid; documents executed when property is donated to the government, social welfare units supporting the widowed, the aged, the injured and the handicapped, or schools; non-interest bearing or discounting loan contracts; preferential loan contracts concluded between foreign governments or international financial institutions and the Chinese government or State financial institutions; and insurance contracts for agriculture and forestry products, and animals in animal husbandry.




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