Doing Business in China

China has correspondingly formulated a series of laws, regulations, rules and measures, formed a whole set of more complete system of laws and regulations, and effectively protected the legal rights of domestic and foreign investors. The competitive advantages in resources of cheap labour and land within China grant a sign of business growth.

Foreign investors may establish enterprises or offices in China. Foreign investment should be in line with China's industrial developing policies and concrete requirements of industrial development of respective regions in China. It should be submitted for examination and approval before the enterprise is formed. Investors may establish Foreign Joint Venture, Foreign Cooperative Venture, Foreign Wholly Owned Enterprise or in the Form of Compensation Trade, Processing and Assembly on Order and Leasing. Each has its characteristics, especially in the percentage of domestic sales rights.

Foreign investors may setup Representative Office (RO) in the main cities in China for business connection, products introduction, marketing, technology exchange and consulting services. However, direct business activities in RO are not allowed.

China's foreign exchange receipts and payments come under the current account and capital account. Capital account covers foreign exchange receipts and payments in respect of direct investment, loans of all kinds, securities investment. Strict control is maintained over the capital account.

Major taxes for FIEs and Foreigners:-

• Value added Tax (VAT) is levied on the increased value of commodities at different stages of production or circulation, or on the added value of commondities.
• Consumption tax (CT) is tax payable on the sales value or volume of taxable consumer goods sold in China by enterpreises and individuals engaged in the production, sub-contracted processing or importation of selected categories (like cigarettes, alcoholic drinks..) It is levied on consumer goods on top of VAT.
• Customs duty is levied by Customs on commercial commodities or articles entering or leaving China's national boundaries or customs territories.
• Business tax (BT) is levied on the revenue generated from the provision of taxable services, like construction & finance ..., and the transfer of intangible assets and the sale of immovable properties within the territory of China.
• Income tax on FIEs & Foreign Enterprises (FEIT) is levied on enterprises' taxable income derived from production, business operations and other sources within the territory of China.
• Individual Income Tax (IIT) is levied on the income derived from sources both inside and outside China of individuals who have domicile in China, or through without domicile have resided for one year or more in China; and on the income derived from sources within China of individuals not domiciled or resident in China, or individuals not domiciled but have resided in China for less than one year.