Income Tax Law Of The People's Republic Of China For Foreign Enterprises

Income Tax Law Of The People's Republic Of China For Foreign Enterprises

Order of the Chairman of the Standing Committee of the National People's Congress No. 13

December 13, 1981
　
Article 1 Income tax shall be paid in accordance with the provisions of this Law by foreign enterprises on their income derived from production and business operations and other sources in the People's Republic of China.
"Foreign enterprises" mentioned in this Law refers, with the exception of those for whom separate provisions are stipulated in Article 11, to foreign companies, enterprises and other economic organizations that have establishments within the territory of the People's Republic of China engaged in independent business operations or in cooperative production or cooperative business operations with Chinese enterprises.
　
Article 2 The taxable income of a foreign enterprise shall be the amount remaining from its gross income in a tax year after the costs, expenses and losses have been deducted.
　
Article 3 The income tax on foreign enterprises shall be computed at progressive rates on amounts in excess of specified amounts of taxable income; the rates are as follows:
Range of Income
Tax Rate (%)
Annual income not exceeding 250,000 yuan 20
That part of annual income from 250,000 to 500,000 yuan 25
That part of annual income from 500,001 to 750,000 yuan 30
That part of annual income from 750,001 to 1,000,000 yuan 35
That part of annual income above 1,000,000 yuan 40
　
Article 4 When paying the income tax in accordance with the provisions of the preceding Article, a foreign enterprise shall also pay a local income tax of ten percent of taxable income. In cases where a foreign enterprise with small-cale production and low profits warrants a reduction in or exemption from the local income tax, the decision shall be made by the people's government of the province, autonomous region, or municipality directly under the Central Government in which the enterprise is located.
　
Article 5 A foreign enterprise scheduled to operate for a period of ten years or more in farming, forests, animal husbandry or other low-profit operations may, upon approval by the tax authorities of an application filed by the enterprise, be exempted from income tax in the first profit-making year and allowed a 50 percent reduction of income tax in the second and third years.
With the approval of the Ministry of Finance, a 15 to 30 percent reduction in income tax may be allowed for another ten years following the expiration of the period for exemption and reductions prescribed in the preceding paragraph.
　
Article 6 Losses incurred by a foreign enterprise in a tax year may be made up with a corresponding amount drawn from the next year's income.
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