(Source: https://pltfrm.com.cn)
Gains from the sale of property by foreign businesses in China are subject to several layers of taxation. The specific tax implications can vary depending on the nature of the property, the structure of the foreign business, and the details of the transaction. Here are the primary taxes that typically apply:
- Corporate Income Tax (CIT): Profits from the sale of property in China by foreign businesses are subject to Corporate Income Tax. The standard CIT rate is generally around 25%. This tax applies to the gain from the sale, which is the difference between the selling price and the original purchase price, after adjusting for any allowable expenses and depreciation.
- Land Appreciation Tax (LAT): This is a tax on the appreciation in value of land and is levied on the gains derived from the transfer of real estate property in China. The rates for Land Appreciation Tax are progressive, depending on the level of appreciation, and can be quite high for properties that have significantly increased in value.
- Value-Added Tax (VAT): Since 2016, VAT has replaced business tax in China. The sale of real property is subject to VAT. The VAT rate and the ability to claim input VAT credits depend on various factors, including the type of property and whether the seller is engaged in a VAT taxable business.
- Stamp Duty: Stamp duty might be applicable on the transaction documents related to the sale of property. The rate for stamp duty is generally low but should be considered as part of the transaction costs.
- Withholding Tax: For foreign entities without a permanent establishment in China, there might be a requirement for withholding tax on the proceeds from the sale of the property. The rate and applicability of withholding tax can depend on the nature of the transaction and any applicable double taxation agreement between China and the company’s home country.
- Deed Tax: The buyer of the property is typically responsible for deed tax; however, the terms of the sale could affect the overall tax burden and should be considered in the transaction negotiations.
- Double Taxation Agreements (DTAs): The provisions of any DTAs between China and the foreign company’s home country can significantly impact tax liabilities. These agreements can provide for reduced rates of taxation or specific methods for avoiding double taxation.
It’s important for foreign businesses to seek professional advice to navigate the complexities of the Chinese tax system. Tax laws and rates can change, and the specifics of each property transaction can significantly affect the tax implications. A tax professional or legal advisor with expertise in Chinese real estate and tax law can provide tailored guidance to ensure compliance and optimal tax structuring of the transaction.
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!
