Contents
Introduction:
China offers one of the world’s largest and most dynamic markets. But if you’re a foreigner operating a company in China—whether as a Wholly Foreign-Owned Enterprise (WFOE), Joint Venture, or via a local representative—you must understand and comply with the country’s tax obligations. Many foreign entrepreneurs mistakenly assume that “no profit” means “no tax,” which is incorrect. Even without income, your company may still be required to file monthly or quarterly reports and pay minimal local taxes. This guide explains how to pay taxes legally in China, what taxes apply, and how GWBMA helps foreign-owned companies manage their compliance from day one.
Do All Foreign-Owned Companies Need to Pay Taxes legally in China?
Yes. All registered entities in China are required to file tax returns, regardless of profitability. Failing to do so can result in:
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Fines or late fees
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Frozen bank accounts
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Blacklisting with China’s tax authorities (State Tax Administration)
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Legal liability for directors and shareholders
Even if your company is dormant or in early stages, you must still file “zero tax returns” monthly or quarterly.
Overview of Main Taxes for Foreign-Owned Companies
Here’s a breakdown of the primary taxes your company may encounter:
| Tax Type | Rate | Description |
|---|---|---|
| Corporate Income Tax (CIT) | 25% | On net profit; may be reduced to 15% for high-tech enterprises |
| Value-Added Tax (VAT) | 3%-13% | Based on industry and revenue level |
| Surtaxes (Local Tax) | ~12% of VAT | Includes education tax, urban construction tax, etc. |
| Withholding Tax | 10% | On dividends, royalties, and interest paid to foreign parties |
| Individual Income Tax (IIT) | Progressive | On employee salaries; must be declared monthly |
Types of Taxes You Must Pay Legally in China (CIT, VAT, etc.)
Even if your business has no income, you still need to:
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Declare VAT (Zero Return) monthly
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File Corporate Income Tax reports quarterly
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Maintain bookkeeping (simplified for dormant companies)
Failure to submit zero reports will lead to tax bureau warnings, and can ultimately cause your company to be listed as “abnormal,” which affects:
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Banking operations
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Trademark registrations
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Visa renewals for foreign directors
Do I Need a Local Accountant? Can GWBMA Handle It?
Yes, a licensed Chinese accountant is required to file tax declarations with the local tax bureau. As a foreigner, you cannot do this directly.
GWBMA offers full-service support for foreign-owned companies:
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Monthly and quarterly tax filings
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Zero-declaration handling
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Invoice management (Fapiao)
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Annual audit & compliance reports
We provide English-language communication and transparent pricing, ensuring your tax compliance without language or system barriers.
Paying Personal Income Tax (IIT) Legally in China for Your Employees
If your foreign-owned company hires employees in China—whether local Chinese staff or foreign nationals—you are required by law to withhold and file Personal Income Tax (IIT) on their behalf.
Key points to comply with legally:
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Employers must calculate and withhold IIT monthly before paying salaries.
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The rate is progressive, ranging from 3% to 45% depending on the salary level.
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You must declare and pay IIT through the local tax bureau using China’s official electronic filing system.
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Failure to withhold IIT can result in severe penalties for the company, including tax evasion charges.
Whether your company has 1 employee or 100, you must ensure this tax is paid legally in China every month.
How Fapiao Works When You Pay Taxes Legally in China
China uses a strict invoice system (Fapiao), and you can’t deduct costs or declare expenses unless you issue and collect them correctly.
Issuing Fapiao correctly is one of the fundamental steps to pay taxes legally in China under current regulations. There are two types:
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General Fapiao: For basic commercial transactions
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Special VAT Fapiao: For business clients seeking tax deductions
Without issuing proper Fapiao, your business operations may not be legally recognized, and you might face problems in audits or licensing renewals.
Do You Qualify for Tax Incentives While Paying Taxes Legally in China
Yes. Depending on your business sector and city, you may benefit from:
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Reduced CIT (15%) for high-tech or encouraged industries
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VAT exemption for export services
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Local subsidies for setting up in certain development zones
GWBMA helps clients evaluate these opportunities during the setup process, ensuring you’re not leaving money on the table.
What Happens If I Don’t Pay Taxes Properly?
The consequences include:
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Daily fines (can accumulate fast)
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Frozen bank accounts
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Difficulty in renewing business license or visa
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Negative credit record in China’s business and personal system
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In serious cases, revocation of your business license
Why “Free Quotation Only” Clients Fail to Pay Taxes Legally in China
At GWBMA, we receive dozens of messages every day asking:
“How much to register a WFOE?”
“Can you give me a quotation for company setup in China?”
“What’s your best price?”
Here’s the truth:
Out of every 100 people who ask for a Free quotation, fewer than 5 actually proceed to register a company. They fail not because of price, but because they don’t understand the full process, the post-registration obligations, and the importance of ongoing compliance.
Registering a company is not about buying a certificate. It’s about:
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Choosing the right structure for your industry and nationality
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Preparing valid documents and a real office address
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Understanding how taxation, invoicing, payroll, and license renewals work
We recommend starting with this essential guide: The company registration Feasibility Study Report.
This page explains:
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Legal company types: WFOE, Rep Office, JV
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Required documents and registration timeline
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Full pricing with no hidden fees
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Taxation, banking, and post-setup obligations
What You Cannot Do Remotely When Paying Taxes Legally in China
While most of the company registration process can be done online, there are two critical steps that require physical presence:
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Bank Account Opening: According to Chinese banking regulations, the legal representative or authorized person must be physically present to open a corporate bank account.
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Real Office Address: China does not allow the use of virtual addresses or P.O. boxes. A real, verifiable business address is required, and some cities conduct on-site inspections.
Case Study: UK-Owned WFOE in Shanghai
A British client registered a consulting WFOE in Shanghai. For the first 6 months, they had no revenue but failed to file zero-tax returns.
By the 7th month, their company was marked “abnormal,” and their bank account was frozen. GWBMA helped them:
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Restore normal status
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File overdue taxes with minimal penalties
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Apply for Fapiao issuance rights
Today, they run a stable operation and fully comply with tax laws.
GWBMA helps clients arrange compliant addresses for registration and coordinate their China visit to complete bank account setup. Today, they run a stable operation and fully comply with tax laws.
Final:
Paying taxes legally as a foreign-owned company in China isn’t just about avoiding penalties—it’s about building a long-term, reputable presence in one of the world’s most competitive markets.
Let GWBMA make your journey secure, transparent, and 100% compliant.
