What kinds of taxes do electronics companies pay in China?
There are two types of taxes for businesses in China, Value-Added Tax and Corporate Income Tax. A 17% VAT is applied to all goods sold in China, no matter if these are sold to local Chinese companies, JVs or wholly-owned foreign companies. However, you can always claim back VAT paid to purchase materials that enabled your sales. It is critical to request a VAT invoice when you purchase. You will often be asked by your suppliers: do you want a VAT invoice or non-VAT invoice? This can make a big difference on the tax that you have to pay. Here is an example: Let’s say you manufacture a telephone set and want to sell it to chain stores for $10. You have to charge $11.70 by adding 17% VAT. However, you can deduct material expenses. If you purchased $5 worth of ICs, components and plastics to make the phones, you paid $5.85 on a VAT invoice for one telephone set. Direct costs of production can also be deducted, like capital equipment depreciation and consumption of goods during the producti
