The Chinese government has established a preferential Corporate Income Tax (CIT) rate for small-scale and low-profit enterprises, i.e. enterprises with an annual turnover below CNY 3 million (around EUR 391k), fewer than 300 employees, and a total asset value below CNY 50 million. Specifically, from 1 January 2022 to 31 December 2024:
- Annual turnover below CNY 1 million (around EUR 130k): 20% CIT rate calculated only on 12.5% of their turnover;
- Annual turnover above CNY 1 million (around EUR 130k) but below CNY 3 million (around EUR 391k): 20% CIT rate calculated only on 25% of their turnover.
In addition, various preferential tax schemes were established to attract or stimulate investment in certain priority sectors or regions. Key examples include the CIT rate reduction from 25% to 15% for companies which are recognised with High- and New-Technology Enterprise (HNTE) status, which requires local R&D operations and IP ownership; companies recognised with Technology Advanced Service Enterprise (TASE) status, which requires a significant amount of overseas outsourcing activities; software and integrated circuit enterprises; companies investing in encouraged sectors in central and western regions or in Hainan. (see dedicated FAQ under ‘Registering a company’ section).
Other tax incentives or subsidies may also be given by local governments to foreign investors investing in priority sectors within their jurisdictions. These are usually specified in policy documents usually published on the websites of the local administrations, and should be a key factor to consider before investing in China.