Service 04 — Tax planning
China’s tax code rewards companies that qualify properly. We build the eligibility evidence, document the related-party position and keep the file ready for the day someone asks.
Engagement at a glance
Tax positions are documented before they are filed; every recommendation states the risk if challenged.
Almost every China tax benefit reduces to the same question: can you prove the facts that the rule requires? Companies that can, pay materially less. Companies that cannot, pay the difference years later with interest.
A typical foreign-invested company leaves money on the table in three places: it never applies for high and new technology status because nobody owns the file; it claims an R&D deduction without the project registers that support it; and it prices intra-group services on a round number with no benchmarking behind it.
We fix all three, in that order, because the first funds the second and the second is worthless without the third. Where a structure is genuinely aggressive, we say so, quantify the downside and let you decide — an adviser who only tells you what you want to hear is not an adviser.
Our position
We do not sell schemes. Every recommendation is a position with statutory authority, supporting evidence and a stated downside if the authority disagrees.
Headline rates for the taxes that affect a foreign-invested company. Eligibility is always fact-specific; the table is a map, not advice.
| Tax or incentive | Rate | Conditions |
|---|---|---|
| Standard corporate income tax | 25% | Every resident enterprise |
| High and new technology enterprise (HNTE) | 15% | Core IP ownership, R&D intensity and revenue tests |
| Small and low-profit enterprise | Effective 5% | Taxable income up to RMB 3 million, policy to 2027 |
| R&D expense super deduction | 100% | Manufacturing and most service enterprises |
| Western region and free-trade zones | 15% | Qualifying encouraged industries, location-specific |
| Qualified software enterprise | 2 years exempt, 3 years at 12.5% | Software products and licensed IP |
| Dividend withholding (default) | 10% | Distributions to a non-treaty offshore shareholder |
| Dividend withholding (treaty) | 5% | Hong Kong, Singapore and similar arrangements, subject to beneficial ownership |
VAT applies at 13% on goods, 9% on transport, construction and real estate, and 6% on most services; small-scale taxpayers use a 3% levy rate. Individual income tax on employment income is progressive from 3% to 45%. Rates reflect policy in force for 2026 and are reviewed annually.
Rate baseline
Nothing here is a loophole: each lower rate is a status the company has to earn and keep. The work is in qualifying and staying qualified — not in filing a clever form.
The default for every resident enterprise without a status.
Withholding on profits paid to an offshore parent.
Requires beneficial-ownership substance, not just a Hong Kong shell.
R&D spend and IP ownership thresholds, re-tested every three years.
Effective burden on the first RMB 3m of taxable income, subject to headcount and asset tests.
Engaged separately or together. The health check is the usual entry point.
We test your activity against the incentive catalogue, then do the work that actually converts a theoretical benefit into a ruling: IP ownership, R&D project registers, staff ratios and the application file.
Related-party flows between your China entity and the group need a defensible policy, contemporaneous documentation and, ideally, an advance view of how the tax authority will read the margin.
Royalties, service fees, dividends and interest are taxed differently and scrutinised differently. We model the net position and document the commercial substance behind each flow.
A periodic review of positions taken across VAT, CIT, IIT and stamp duty, ranked by exposure and probability — not a 40-page list of theoretical risks.
The deliverable at each stage is a document your board, auditor or bank can read.
We review three years of filings, the related-party flows and the current structure, then rank exposures and opportunities by value and probability.
Each opportunity becomes a documented position: eligibility evidence, computation, filing mechanics and the risk if challenged.
Applications, amended filings, policy documents and registers are prepared and filed. We do not hand you a memo and wish you luck.
Documentation is refreshed each year so that a request for the file is answered in days, not months.
Tax work is quoted as a fixed fee once the scope is clear. Where an application is refused, we do not charge for a resubmission within the same year.
Tax health check
RMB 12,000one-off
A ranked view of exposure and opportunity across three years.
Transfer pricing file
from RMB 38,000per year
Contemporaneous documentation that stands up in an enquiry.
Retained advisory
RMB 2,600per month
A tax partner on call, with filings reviewed before submission.
HNTE applications are quoted at RMB 38,000–68,000 depending on the technology field and the state of the IP portfolio. Government fees and official charges are additional and passed through at cost.
Facing an enquiry?
Call us before you reply to the inspection notice. The first response usually sets the scope of everything that follows.
+86 400 098 9866The three levers that matter most are high and new technology enterprise status (15% instead of 25%), the 100% R&D super deduction, and getting the transfer-pricing policy right so the China margin is both defensible and appropriate. Incentives are applied for, not claimed automatically — HNTE requires IP ownership in China, an R&D expense ratio and a technology-product revenue test, and the file is re-examined every three years.
Contemporaneous documentation is required where related-party purchases and sales exceed RMB 200 million, other related-party transactions exceed RMB 40 million, or the entity is loss-making with related-party dealings. In practice, a smaller company should still hold a local file: it is the first thing requested in an enquiry, and the penalty for not having one is separate from any tax adjustment.
Yes, usually to 5%, under a double tax arrangement such as the mainland–Hong Kong or China–Singapore treaty. The reduction is not automatic: the recipient must be the beneficial owner, hold the required equity percentage, and have substance. Applications are filed with the withholding agent at the time of distribution, and retrospective claims are possible but far slower.
Arranging your affairs to qualify for incentives the law provides is legitimate and encouraged. What is not permitted is creating a structure without commercial substance purely to obtain a tax benefit — the tax authority can disregard it under the general anti-avoidance rules. Our work always documents the business rationale first and the tax outcome second.
A foreign investor that reinvests distributed profits directly into a encouraged project in China can defer the 10% withholding tax on that dividend, provided the funds stay invested for at least five years. It is one of the few incentives available to the offshore shareholder rather than the Chinese company, and the application must be made through the tax authority before the distribution.
Inspection risk rises with three things: sustained losses with growing revenue, related-party flows that do not match a documented policy, and invoice patterns that differ from industry norms. A review tells you where you sit on those three axes and what a defensible file looks like before anyone asks.
Yes. We prepare the position paper, assemble the supporting evidence, and attend meetings with the inspection team. Our role is usually to narrow the dispute to specific transactions rather than to argue the whole assessment, which is how adjustments get reduced.
HNTE status attaches to the legal entity, not the shareholders, so an equity transfer does not by itself remove it — but the substantive tests are re-run at each three-year review, and a change of business substance can fail them. Dividend treaty benefits, by contrast, depend on the new shareholder’s residence and substance.
Next step
Send your latest annual CIT return and a list of intra-group payments. We will come back with the two or three positions worth pursuing, and what they are worth.
