Taxes & potential support

For most small trading, consulting or service companies, three taxes are a useful starting point:

• Value-added tax (VAT) relates to selling goods or providing services. It is calculated by reference to taxable sales, with the amount payable depending on your VAT status, applicable rates, eligible input VAT credits and reliefs. It is not a tax on profit.
• Corporate income tax (CIT) applies to the company’s taxable profit. The standard rate is 25%. Qualifying small, low-profit enterprises can currently benefit from an effective rate of 5% through the end of 2027. Taxable profit is calculated under tax rules and may differ from accounting profit.
• Individual income tax (IIT) applies to personal income. When the company pays you or employees a salary, it generally needs to withhold and remit the applicable individual income tax. This is separate from the company’s corporate income tax.

Other taxes and surcharges may apply, including stamp duty and taxes connected with imports and exports.

Start with three separate concepts: your company’s sales, your company’s profit, and your personal income. Each is taxed differently.

These are VAT classifications—not different types of company.

Small-scale VAT taxpayers generally have annual taxable sales of no more than RMB 5 million. VAT is usually calculated using a simplified method, without input VAT deductions. Most eligible transactions subject to the 3% levy rate currently benefit from a reduced 1% rate through the end of 2027. Exemptions and exceptions also apply.

General VAT taxpayers normally calculate VAT as output VAT minus eligible input VAT. Common rates are 6%, 9% and 13%, depending on the activity. Registration is generally required above the applicable sales threshold, while eligible businesses below it can register voluntarily.

A lower headline rate does not automatically mean a lower tax bill. The right approach depends on your purchases, customers’ invoicing requirements and trading arrangements.

General VAT taxpayer status does not automatically prevent your company from qualifying for small-business corporate income tax relief. The two are assessed separately.

Yes. No revenue or no tax payable does not automatically remove your filing obligations. Your company must complete the applicable returns on schedule and accurately record expenses, payroll and other activity.

Late or missing returns can lead to correction notices, back-filing and penalties. A taxpayer with filing obligations that fails to submit returns for all taxes for three consecutive months can be classified as an abnormal taxpayer, affecting invoice use and normal operations.

Reporting zero when you have revenue is a different issue. Even exempt revenue must be reported in the appropriate fields. An incorrect return that causes underpaid tax can lead to back taxes, late-payment charges and penalties. Conduct meeting the legal definition of tax evasion carries more serious consequences; not every reporting error is tax evasion.

If you have no sales but still pay rent, salaries or service fees, those costs must still be recorded.

No tax to pay does not mean nothing to file. Tax-exempt revenue is not zero revenue.

Each month, we confirm your actual transactions and staffing arrangements. Please prepare:

• Payroll: whether salaries were paid, how many people were paid and each person’s salary details.
• Social insurance: the employees covered and their contribution records.
• Bank and payment accounts: account balances, complete statements and other business payment records.
• Income and expenses: transaction details, supported by invoices, contracts or other relevant evidence.
• Other funding: identify shareholder contributions, loans and expenses paid personally on the company’s behalf.

Even in a month without revenue, we need to confirm whether there were expenses, payroll payments or other movements of funds. A closing bank balance alone does not explain those transactions.

You provide complete, accurate business records. We help turn them into clear accounts and the applicable tax filings.

Eligible small businesses can benefit from standard tax relief. Examples include corporate income tax relief for qualifying small, low-profit enterprises and applicable VAT relief for small-scale taxpayers.

If your company already pays little tax, the additional savings available may be limited. We focus first on applying the relief your company qualifies for and maintaining accurate accounts and filings.

Having no taxable profit generally means no corporate income tax is due on that profit, but it does not automatically eliminate VAT or other tax obligations.

For a business getting started, using the standard relief available to you is usually more practical than building your plans around a subsidy.

Potential support can be a factor, but first check whether it fits your actual business.

Some parks may offer support for specific projects, such as artificial intelligence. Eligibility depends on the particular programme, business activity, operating arrangements, investment and application requirements. Registering at a park does not automatically qualify your company.

For small trading and service businesses, compare address costs, ongoing administration, operating needs and staffing before evaluating any confirmed support.

Scott’s practical advice: If you expect annual revenue below RMB 1 million and are still testing your business idea, we generally recommend giving park incentives less weight in your location decision. Focus first on living costs, ongoing business expenses, and proximity to your suppliers and customers. At this stage, a city that makes your business easier to run may offer more value than an incentive you have not yet qualified for.

The RMB 1 million figure is a practical planning guideline, not an eligibility threshold for government support.