What is taxed in the enterprise income tax law?
In accordance with the "Enterprise Income Tax Law" of China, any foreign investment enterprise which establishes its head office in China shall pay income tax on income derived both from sources inside and outside China. Other foreign enterprises shall pay income tax on income derived from sources inside China.
"Income derived from sources inside China" refers to:
(1) The income derived from the production and business operations of foreign investment enterprises and foreign enterprises which have establishments in China, as well as profits (dividends), interest, rentals, royalties and other income arising within or outside China connected with establishments or sites in China by foreign investment enterprises or foreign enterprises;
(2) the income received from China by foreign enterprises which have no establishments or sites in China;
(3) profits (dividends) earned by enterprises in China;
(4) interest derived within China such as on deposits, loans, bonds, payments made provisionally for others, and deferred payments;
(5) rentals on property leased to and used by lessees in China;
(6) royalties such as those received from the provision of patents, proprietary technology, trademarks and copyrights for use in China;
(7) gains from the transfer of property, such as houses, buildings, structures and attached facilities located in China and from the assignment of land-use rights within China;
(8) other income derived from China and stipulated by the Ministry of Finance to be subject to tax.
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