Which Taxes Does a Company Pay?
Chinese companies mainly face five kinds of taxes:
- VAT: levied on value added (3%/6%/9%/13%)
- Surtaxes: urban construction (7%/5%/1%) + education (3%) + local education (2%)
- Corporate income tax: on profit (25% standard; 5%/10% for small firms)
- Individual income tax (withheld): on employee salaries
- Stamp duty: on contracts, ledgers and more
Small-Scale vs General Taxpayer
Small-scale taxpayer: annual invoicing ≤ CNY 5M at 3% reduced to 1%; monthly ≤ 100K / quarterly ≤ 300K exempt.
General taxpayer: invoicing above CNY 5M at 6%/9%/13%, with input VAT creditable.
How to choose?
- Downstream clients don't need special invoices and invoicing ≤ CNY 5M → choose small-scale to save tax
- Selling to large enterprises that need invoice credits → choose general taxpayer
- Large trade/manufacturing invoicing → general taxpayer status is mandatory
2026 SME Income Tax Incentives
Small low-profit enterprises (taxable income ≤ CNY 3M, ≤ 300 staff, assets ≤ CNY 50M) enjoy an effective rate of 5%:
| Annual Profit | Effective Rate |
|---|---|
| ≤ CNY 3M | 5% |
| > CNY 3M | 25% |
A Real Ledger: CNY 1M Invoicing
A small-scale service firm invoicing CNY 1M/year with one employee at CNY 120K gross. Total taxes:
- VAT: 1M × 1% = CNY 10K
- Surtaxes: 10K × 12% = CNY 1,200
- Stamp duty: ≈ CNY 200
- CIT: assume CNY 300K profit → 300K × 5% = CNY 15K
- Withheld income tax: ≈ CNY 3,600
Total taxes ≈ CNY 30K — 3% of invoicing. A sole proprietorship of the same size saves 30–50%.
💡 Skip the math — try the GFWPS tool:Corporate Tax & VAT Calculator →