(Source: https://pltfrm.com.cn)
Foreign companies involved in the healthcare sector in China face a set of specific tax implications and regulations. This includes companies involved in pharmaceuticals, medical devices, healthcare services, and digital health technologies. Here are the key tax considerations for such entities:
- Corporate Income Tax (CIT): Foreign healthcare companies are subject to CIT on their profits earned within China. The standard CIT rate is generally around 25%. However, tax incentives may be available for certain types of investments, such as those in high-tech sectors or in underdeveloped regions, which might include some healthcare services.
- Value-Added Tax (VAT): The provision of healthcare services and the sale of healthcare products are subject to VAT. The specific VAT rate can depend on the type of product or service. There have been various VAT reforms in China that have impacted the healthcare sector, including possible exemptions or reductions for certain healthcare services.
- Import Duties and Taxes: Importing medical devices or pharmaceuticals into China can attract customs duties and import VAT. The rates depend on the type of product and its value. However, certain essential drugs and medical equipment might be eligible for reduced rates or exemptions.
- Withholding Tax: Payments made to foreign entities for the use of intellectual property, such as patents or technology in the healthcare sector, are subject to withholding tax in China. The rate is typically around 10%, but this can vary depending on any applicable Double Taxation Agreements (DTAs).
- Research and Development (R&D) Incentives: There may be specific tax incentives for R&D activities. For example, additional deductions for R&D expenses are often available, encouraging innovation in the healthcare sector.
- Preferential Policies for High-tech Enterprises: Companies recognized as high-tech enterprises may enjoy preferential tax treatment, including reduced CIT rates. The healthcare sector, especially areas involving advanced medical technology, often qualifies for such categorization.
- Regulatory Compliance Costs: Compliance with China’s healthcare regulations, which cover product approvals, clinical trials, data protection, and other areas, can entail significant costs. While these are not taxes per se, they are an important financial consideration for foreign healthcare companies.
- Transfer Pricing: As with other industries, foreign companies in the healthcare sector must adhere to China’s transfer pricing rules, ensuring that their intra-group transactions are conducted at arm’s length.
- Double Taxation Agreements (DTAs): DTAs between China and the foreign company’s home country can impact the tax treatment of various types of income, potentially offering reduced rates or specific relief measures.
- Individual Income Tax (IIT) for Expatriates: Expatriate employees working in China for foreign healthcare companies are subject to IIT on their China-sourced income, which requires careful planning and compliance.
Given the complexity of the tax system and the specialized nature of the healthcare sector, foreign companies should seek advice from tax professionals or legal advisors familiar with both Chinese tax law and the healthcare industry. This ensures compliance with tax obligations and enables companies to take advantage of any available incentives or deductions.
PLTFRM is an international brand consulting agency that works with companies such as Red, Tiktok, Tmall, Baidu, and other well-known Chinese internet e-commerce platforms. We have been working with Chile Cherries for many years, reaching Chinese consumers in depth through different platforms and realizing that Chile Cherries exports in China account for 97% of the total exports in Asia. Contact us and we will help you find the best China e-commerce platform for you. Search pltfrm for a free consultation!
