China

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Business Practices

General information: Communicaid
Kwintessential Cross Culture solution
Opening hours and days: Banks: Monday to Friday, from 8.30 to 17.00, from 8.00 to 13.00 on Saturday.

Public holidays

National holiday	October 1, 2
New year	January 1
New lunar year	during February
Women's day	March 8
Labour day	May 1
Youth day	May 4
Children's day	June 1
Army day	August 1
Teachers' day	September 9

Periods when companies usually close

Labour day	from May 1-7.
Spring festival	One week off.

Accounting Rules

Tax year: The financial year begins on January 1st and finishes on December 31st of the same year.
Accounting standards: The accountancy standards for companies promulgated by the Ministry of Finances (MOF) of 30 November 1992 and which came into effect on July 1, 1993. China promulgated its first complete standards specific to accountancy in 1997 and the MOF promulgated 13 standards more specific to accountancy since then.
Accounting regulation bodies: Ministry of Finances
Chinese committee of accounting standards
CICPA
Accounting reports: Audit report normally contains a paragraph of definition of the 'task' or `scope' and a paragraph of opinion. The paragraph of opinion aims at establishing if the accounts were prepared according to the appropriate rules and regulations. All the reservations in opinion must be elaborated above. Statements of financial accounts or reports should comprise a Balance Sheet, profit and loss accounts, a report of gross margin of self-financing, notes on the accounts and an account for appropriation of profits and losses.
Publication requirements: Annual publication.
Professional accountancy bodies: CICPA
Certification and auditing: National Audit Office of China (CNAO)
Accounting news: China Accounting News

Tax Rates

Consumption taxes

Nature of the tax: Consumption tax
Tax rate: 30 to 45% for tobacco, 5 to 25% for alcoholic drinks, 30% for alcohol, 17% for the personal care products for skin and hair, 10% on gold, money and precious stones.
Reduced tax rate: Preferential rate of 4% or 6% for small companies.
Sale of certain products (running water, books, medicines, newspapers and magazines, certain agricultural products, chemical fertilizers, liquefied gas, coal for domestic use) are taxed at the preferential rate of 13%.
Other consumption taxes

Corporate taxes

Company tax: 30% + loca tax of 3%
Tax rate for foreign companies: Resident companies are taxed on their world incomes and the nonresident companies on the Chinese incomes.
Capital gains taxation: Tax on capital gains (20% rate) for a Chinese company is added to the regular tax.
Tax on capital gains on the sale of real estate (20%) is calculated as sale price - purchase price.
When capital gain is above 50% of the purchase price, the income tax rate on capital gain ranges between 30% and 60%. (60% when the capital gain is more than 200%).
Main allowable deductions and tax credit: The following expenditure is deductible under certain conditions:
- Deduction of losses (deductible over 5 years)
- Consolidated financial statements
- Bad debts up to a limit of 3% of the granted loans (Chinese foreign companies in the financial sector) .
- Financial expenditure for income generation (except shareholder loans as per limit legally defined in China).
- Transactions between the associated parties
- The method of depreciation is linear; however, a foreign company can make a request to Chinese tax authorities for an accelerated rate of depreciation.
Other corporate taxes: Taxes applicable to foreigners, to companies with overseas investment ("FIEs") and foreign companies ("FEs") are:
- tax on transactions (turnover tax): Value Added Tax (17%, 13% for certain products), consumption tax (3 to 50%), commercial tax (3 to 20%).
- environmental tax on natural resources
- land taxes: urban property tax (1.2% of the original value or 12% on the rental value)
- taxes generally paid in advance on vehicles and ships
- 10% of the taxable consideration on the purchase and import of cars, motor bikes, trams, electrical buses, carriages and certain types of stamp duty on trucks
- Stamp duty: between 0.005% to 0.1%
- Contract tax, on the assignees or the assignees of the ownership of the right of use of the land or the real estate will be taxed from 3% to 5%

Individual taxes

Tax rate

Income tax

progressive rate from 5 to 45%

Allowable deductions and tax credit: - credit for donations up to 30% of the income.
- income of personnel services (deduction of CNY 800 or 20%).
- current expenditure for rental income, up to CNY 800 for each simple expenditure.
- relief for an individual who suffered a natural disaster.
- relief for handicapped person, widows/widowed person and orphans.

No preferential treatment for married couples.
Special expatriate tax regime: For foreigners taxed in China, an additional amount of 3,200 RMB can be reduced from their monthly income, or a total of 4,000 RMB.

Double taxation treaties

Countries with whom a double taxation treaty have been signed: See the list of the treaties of non double taxation signed by China.
Whithholding taxes: Withholding tax rates in China are 10% for dividends, 10% for interest and 10% for royalties.

Sources of fiscal information

Tax Authorities: Fiscal Authority
Other domestic resources: Chinese government

Intellectual Property

National organizations: National Office of intellectual property (SIPO)
National administration of copyrights
Chinese Office of registered patents
Regional organizations: Expert Group on intellectual property rights (IPEG)
International membership: Member of the WIPO
Signatory to the Paris Convention for the Protection of Intellectual Property
Membership to the TRIPS agreement - Trade-Related Aspects of Intellectual Property Rights (TRIPS)

National regulation and international agreements

Type of property and law	Validity	International agreements signed
Patent Patent Law 1992	non renewable protection of 20 years	Patent Cooperation Treaty (PCT) Strasbourg agreement concerning the International Patent Classification
Trademark Law on Marks	10 years. Renewable indefinitely	Trademark law treaty Nice agreement Protocol relating to the Madrid Agreement
Design Patent Law	10 years
Copyright Copyright Law	During the lifetime of the author and 50 years after his death	Berne convention Convention for the Protection of Producers of Phonograms against unauthorized duplication of their phonograms Rome convention for the protection of performers, producers of phonograms and Broadcasting organizations WIPO copyright treaty WIPO performances and Phonograms treaty
Industrial Models Patent Law	10 years

Legal Framework

Independence of justice: Judiciary is not independent in China. The government controls the judiciary. The CCP directs verdicts and sentences, particularly in politically sensitive cases. China has not accepted the obligatory jurisdiction of the International Court of Justice (CIJ).
Equal treatment of nationals and foreigners: The judiciary does not guarantee an impartial trial to a foreign national. A high degree of corruption exists in the country, especially corruption within the CCP is rampant.
The language of justice: Mandarin-Chinese.
Recourse to an interpreter: Possible.
Sources of the law and legal similarities: The legal system is based on the Confucian philosophy of the social order by moral education. After the 1911 revolution, the Republic of China mainly adopted a legal code of Western type inspired by the German law.
The establishment of the People's Republic of China in 1949 brought a Soviet system influenced by socialism. There does not exist a tradition of constructive law in China and the first civil code dates from the beginning of the year 1980 and is written in a rather incomplete way as compared to the Western laws, which till today leaves an important place for arbitrary judgments. The law is subject currently to a progressive reform encouraged by external and internal pressures.. The constitution in force currently was promulgated in December 1982.
Checking national laws online: China Legislative Network system

Standards

National standards organizations: Standardisation Administration of China (SAC)
Chinese Association for Standardisation
Integration in the international standards network: SAC is the member of:
- The Internationale Standardisation Organisation (ISO) and of the International Electronic Commission (IEC)
- The APEC/SCSC, sub-committee of Standards and Conformity of the organisation of Asia- Pacific economic cooperation
- The ASEM/TFAP/SCA, Plan and Standards of action for facilitation of commercial exchanges and evaluation of conformity of the Asia-Europe Dialog (ASEM)
- The Congress of Standards for the Pacific Zone (PASC)
Classification of standards: List of Chinese Codes and Standards.
Online consultation of standards: Publications relating to the Chinese standards of the SAC.
Certification organizations: Chinese Obligatory Certification (CCC)
Administration of certification and accreditation of China (CNCA)
Certification organizations
AQSIQ

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