CEPA

As investors in the service sectors of CEPA in the Mainalnd, Macao enterprises are engaged to the following four tax categories:

Business tax - Payers of business tax are referred to all enterprises, business units, individual storeowners and individuals, engaged in the provision of taxable services, transfer of intangible assets or sale of immovable properties in the territory of China. The taxable items of business tax are levied according to the types of services, with tax rates generally ranging from 3% to 5%. Specific sectors such as the entertainment services, have a tax rate up to 20%, while others such as medical care, education, elderly care, agricultural and cultural services are exempted from payment of business tax.
Value-added tax – The value-added tax is applicable to all reatailing services engaged in the sale or import of goods, generally with a rate of 13% to 17%. In addition, consumption tax will also be levied on the sale of specific products (eg. tabacco, liquor, cosmetics etc) to related enterprises.
Enterprise income tax – Enterprise income tax is levied on the taxable income of all enterprises, with foreign-invested enterprises applicable to 33% in general. Nonetheless, for businesses engaged in encouraged industries and regions (such as the Western region) of the Mainland, foreign enterprise can enjy a preferential rate down to 24%. During the 5th Session of the Tenth National People’s Congress, the "Enterprise Income Tax Law of the People's Republic of China" was adopted on 16th March, 2007 to practise the enterprise income tax at 25% which will come into effect from 1st January, 2008.
Individual income tax - Income taxpayers refer to individuals who reside and earn income in the territory of China; as well as those who earn income but do not reside in China; including citizens of China, foreigners, people of Hong Kong, Macao and Taiwan who gain income in the Mainland. The tax rate of individual income tax varies when applying to different taxable income categories: a) income derived from wages and salaries – the taxable income is charged on a monthly basis at 9 progressive rates ranging from the lowest grade of 5% to the highest grade of 45%. Starting from 1st March, 2008, the initial taxable income will be increased to RMB2,000; b) income derived from production and business operations by individually-owned stores; income derived from contracting or leasing operations of enterprises and institutions – at 5 progressive rates ranging from the lowest grade of 5% to the highest grade of 35% will be applied; c) income from remuneration to authors; income from labour services; income from royalties; income from interests, dividends, bonuses; income from leasinf of property; income from transfer of property; incidental income and income from other sources – a flat rate of 20% will be applied.

In addition to the above mentioned tax categories, other payable taxes in the Mainland are regarded as “behaviour tax”, implying that enterprises will be tax-liable to operations in relation to commercial and legal aspects. When enterprises are engaged in the purchase of land and real estate, they will be subject to land appreciation tax and urban real estate tax. In other words, if enterprises are only involved in renting ogf commercial premises, they are not liable for “behaviour tax”.

For further information regarding taxation applicable to enterprises and individuals, please visit the following websites:

State Administration of Taxation
Guangdong Provincial State Taxation Bureau (Chinese Only)

Types of Taxation in the Mainland under CEPA

Taxes Sectors	a. Business Tax	b. Value- added tax	c. Enter- prise Income Tax	d. Indiv- idual Income tax	e. Consu- mption Tax	f. Vehicle Purchase Tax	g. Stamp Duty	h. Urban Real Estate Tax	i. Vehicle and Vessel Usage Tax	j. Land Appre- ciation Tax
1.Management Consulting
2.Audiovisual, Convention / Exhibition, Advertising
3.Accounting, Legal
4.Construction and Real Estate
5.Medical and Dental
6.Distribution
7.Logistics
8.Freight Forwarding Agency
9.Storage and Warehouse
10.Transport
11.Tourism
12.Banking
13.Securities
14.Insurance
15.Value-added telecomm- unications
16.Air Transport
17.Information Technology
18.Cultural and Recreational
19.Trademark Agency
20.Patent Agency
21.Job Referral Agency
22.Job Intermediary
23.Individually Owned Stores

Remark:
For items a, b, c and d in the table are categorized as “behaviour tax”. Enterprises are obliged to pay these taxes in operations in relation to commercial and legal aspects under normal ocircumstances. For the rest of the types of taxation, they will be leived when enterprises are engaged in relative legal act pertaining to taxes.