Offshore Company in Italy

1. Why Italy?

Founding member of European Union, Italy is the seventh economic system in the World (GDP 2009: 2.313.893 millions of US$) and one of the most important exporters. Two-thirds of Italy's Gross Domestic Product (approximately 69%) is represented by the services sector, whose strong point is tourism. Approximately 29%of the national income is owing to industry (including the construction sector) and the remaining approximate 2% derives from agriculture. The strongest industrial sectors are machinery and apparel/textiles. One of the Italian system's peculiarities lies in an "industrial cluster" model, well-established in a clearly defined are and consisting of a dense fabric of small and medium sized enterprises, each specialized in a specific phase of production. There are a lot of specific entrepreneurial expertise with a great potentiality but limited by the small size of their organization. Due to long lasting history of friendly contact Italy is fully open to foreign investors.

2. Legal Framework

It is based on the constitution stating that private economic initiatives are free and shouldn't interfere and be against social utility. The legal system is integrated in the EU system and agreements and companies are basically regulated by the Civil Code. Italian law places no restrictions on foreign investments: this general principle can be limited on reciprocity basis.

3. Banking

Central Bank is Banca d'Italia that is part of European System of Central Banks and is in charge of the control of the finance system. In the banking sector after a concentration process a few large Italian Banks together with international banks have very large market shares. Credit services are at the top worldwide level.

4. Financial Regulatory Authority

Listed companies are under the control of CONSOB, banking system of banica d'Italia and insurance companies of ISVAP. Large M&A operations are under the control of Antitrust Authority. Economic sectors like energy and communication are under the control of specific authorities.

5. Taxation

5. a. Corporate Tax 

Corporate Tax (IRES) rate is 27.5% with a limited deduction of interest and a participation exemption system. Regional Tax (IRAP) rate is 3.9% with a limited deduction of labor cost and no deduction of interest allowed.

5. b. Personal Tax Rates 

Italian residents are taxed on their worldwide income and a tax credit is granted for foreign incomes. Personal Income Tax (IRPEF) rate is gradual from 3% up to 43% and there are also limited regional and local taxes. No Wealth Tax is provided in Italy.

5. c. Social Security

Social security system (INPS) is mandatory for all workers and the National Health System (SSN) basically takes care of all citizens and of other residents on demand.

5. d. Customs & Excise Duties

Since Italy is member of European Union customs and Excise duties are harmonized according to EU law.

5. e. V.A.T.

VAT system is based on EU 2006/112/CE Directive. Ordinary rate is 20% and reduced 10% and 4% rates are provided for the law. Exemption is related to financial services, health care and education.

5. f. Tax Incentives

Flat 12.5% rate is provided with reference to personal income tax related mainly to dividends, interests and cappital gaions. Inheritancs Tax rate is stated from 4/%  to 8% accordding to degree of kinship. Inheritance Tax is levied for spouse and direct line heirs only on any value exceeding euro 1.000.000 for each heir. Inheritance Tax is not applicable also with reference to company's shares if heirs work in the company or hold the control of the company for more than 5 years.

Notes: A strict monitoring of assets abroad belonging to residents of Italy is provided for the law.

6. Main Types of Corporate Forms

Companies can be distinguished into the following types:

1.  Partnerships

  - informal partnerships (Societa semplice)

  - general partnerships (Societa in nome collettivo)

  - limited partnerships (Societa in accomandita semplice)

2.  Companies

  - limited liability company (Societa a responsabilita limitata), minimum comp[any capital Euro 10.000

  - company limited by shares (Societa per Azioni), minimum company capital Euro 120.000

  - limited partnership with share capital (Societa in accomandita per azioni), minimum company capital Euro 120.000

3.  Cooperatives based on the principle of mutuality

  - cooperatives (Societa cooperative)

  - mutual issuance companies (Mutual assicuratrice)

7. Company Incorporation

The articles of association need a notary act the basic elements of the company and the by-laws. new enterprises must register with the Register of Companies (through the chamber of commerce), notify the tax authorities and register employees with the relevant social security authorities. The registration process can be carried out in  a few days after the notary deed. It is possible for companies to have only one shareholders if correctly registered with the register of companies . Foreign companies can register with Italian Register of companies as branches on the basis of a deed translated into Italian and legalized in Italy. Special laws also apply to banks, insurance companies , investment and trust firms.

8. Reporting & Auditing

With in 120 days from the end of the financial year the financial statements together with their reports of directors and statutory auditors must be approved by the shareholders and filed with the Register of Companies. S.P.A and large S.R.L must appoint a board of statutory auditors in charge of the compliance with law and company's by-laws and the auditing of account. Complete auditing is mandatory for listed companies.

9. Special Notes / Country Update

There is a full disclosure referring to articles of association by-laws, directors, shareholders, financial statements with annual reports of management and auditors and minutes of ordinary meetings of shareholders approving the financial statement  and all extraordinary meetings of shareholders. For S.P.A by-laws may provide that the management and control be carried out alternative by system based on a board of directors and a board of statutory auditors, by a system based on a management board and on a supervisory board and a system based on the board of directors and on committee formed with in the board of directors. relationships with tax Authority and Chamber of commerce are web based. The Stock Exchange was merged with LSE. It encouraged the listing of Italian Companies especially the small/medium ones. Now Italian companies have an easy and direct access to LSE AIM market: "the most successful growth market in the world.


Double Taxation Agreement


Italy has Double taxation treaty with different countries:

• Argentina
• Austria
• Brazil
• Bulgaria
• China
• Cyprus
• Czech Rep.
• France
• Germany
• Hungry
• India
• Indonesia
• Israel
• Japan
• Kuwait
• Malaysia
• Malta
• Mauritius
• Mexico
• Morocco
• Netherlands
• Poland
• Portugal
• Romania
• Russia
• Singapore
• Slovenia
• Spain
• Switzerland
• Tunisia
• Turkey
• UAE
• USA
• Venezuela

Offshore Company in Germany

1. Why Germany?

Of Europe's economies Germany is the largest and has a political and economical key position. Worldwide Germany is ranked 4th of 180 countries analyzed by the IWF in 2009 for 2008 with the criteria BIP in US-Dollars. Germany is member of the EU, G8, UN, OECD and OSZE. Germany has a highly valued influence in the worldwide economic and monetary policies. In Europe Germany is positioned quite in the center with a top infrastructure, especially regarding the good and densely road and railways systems and the various airports. The airport Frankfurt am Main is the leading European cargo airport and the third largest passenger airport. Germany is famous for its industrial production with international important companies as VW, Daimler, Siemens, BASF, Thyseen- Krupp. The Slogan "Made in Germany" Still is of great importance. The last time that Germany became "Export World Champion" was in 2008. Another important economic criteria is the great variety of branches. Apart from industry the service branch is a continuously growing sector. Mainly the German population is well-educated and therefore there exists a great stock of highly qualified employees. Politically and socially Germany is extraordinarily secure.

2. Legal Framework

The Legal Framework system in Germany divides in private law, public law, criminal law and litigation. Characteristic for the German Legislation is the principle of concurrent legislation between the federation, the States and Municipalities which means that the following hierarchy only has the power to enact a law if the preceding has not done so. The court decisions in the above mentioned four fields of law are based on the established law and not on precedents. The judgement are basically done by the courts of the federal states. So the Germany jurisdiction is completely different to the Anglo-american Common Law which also is called the "case law". Important to mention for international tax matters is that Germany has signed about 88 double tax Treaties.

3. Banking

Characteristic for the German Banking system is the great variety, consisting of Trustee Savings Banks (Sparkassen), cooperative banks, the German big banks and in comparison with the foreign countries quite few private banks. The banking business underlies the rules of the German Banking law (Kreditwesengesetz). The banks are controlled by the federal Supervisiory Office for Financial Services (Bundesanstalt Fur Finanzdienstleistungsaufsicht = Bafin) to prevent for example money laundering and Corruption etc. The largest German bank is the Deutsche Bank.

4. Financial Regulatory Authority

The German Banking Supervisory authority is the Federal Supervisory Office for Financial Services (Bundesanstalt Fur Finanzdienstleistungsaufsicht = Bafin). The Bafin supervises commercial banks (about 2.080 banks), financial service companies (about companies), insurance companies (630 companies) and the securities trading. The Bafin is an institution under public law with about 1.700 employees. It funds itself complete out of charges and contributions which the supervised companies have to pay. Therefore the Bafin is independent from the federal budget. The Bafin also controls the ability to pay of the supervised institutions and is looking after fair and transparent market conditions. Consumer protection, certification of old age benefits contracts and avoidance of money laundering and financing of terrorism are also tasks of the Bafin.

5. Taxation

5. a. Corporate Tax


Since corporate income tax was reduced from 25 to 15% in 2008 Germany is no longer a high tax-country. Depending on their location corporations pay overall taxes of 23% to 32%. Taxes consist of corporate income tax, solidarity surcharge and local trade tax. A corporation is to be taxed in Germany if its seat or place of management is ion Germany or if it has income form Germany.


5. b. Personal Tax Rates


Individuals pay income tax, 5.5% of that solidarity surcharge and if they are a member of church 8-9% church tax. Married couples may apply for joint assessment. Per person a personal exemption of 8.004 Euro and tax free allowances are granted. Income tax rates go from 14% to 45%, reaching the top rate at a taxable income of 250.371 Euro per person.


5. c. Social Security


Employees and employees each pay a maximum of 19-20% of wages for contributions to health insurance are about 16% of wage income with a ceiling of 45,000 Euro annually and contributions to statutory pensions and unemployment insurance are 22.7% of wage income with a ceiling of 66,000 Euro (55,800 Euro in Eastern Germany). Exemptions are possible for foreigners working in Germany for a limited period of time, managing directors who hold a majority of the share capital and employees whose wages exceed the above limits.


5. d. Customs & Excise Duties


Transfer of goods to and from Non-EU Countries is surveilled by the customs authorities. Customs or important VAT might to be paid. Excise duties are imputed on energy carriers, alcohol, alcoholic drinks and tobacco products.


5. e. V.A.T.


The normal VAT rate is 19%, the reduced VAT rate is 7%. Input VAT can be refunded if applied for and original invoices can be presented and either fiscal registration was made in Germany or if foreigners qualify for the conditions for refund of VAT. Depending on the amount of revenues taxpayers have to hand in monthly quarterly or annual tax declarations. Small enterprises with estimated turnover of less than 50,000 Euros and less than 17,500 Euros in the previous year may be exempted from VAT (and from refund of input VAT).


5. e. Tax Incentives


Corporations usually pay only 1.5% tax on profits from dividends and on capital gains from the sale of shares. Several corporations belonging to the same group with in Germany may form a tax group and thus net profits and losses. In order to avoid inheritance or gift tax high tax allowances for husbands or spouses and children are granted to successors of entrepreneurial assets under certain conditions  Income tax: many costs are tax deductible.


Notes: Cash over 10,000 Euros per person has to be the border when entering or leaving the EU.

6. Main Types Of Corporate Forms

The most common used corporate forms are the limited liability company (GmbH) and the limited liability partnership with a fore mentioned corporation as unlimited partner (KG). In addition publicly held companies use the form of a public corporation issuing shares (AG) and obligations to finance their activities. Besides the limited partnership the typical partnership includes jointly and severally liable partners only. Shareholders and partners with limited liability are liable to the extent capital contributions are not paid in or deemed to be paid back. Corporations or partnerships with limited liability practically have no minimum capital requirement. However ordinary limited liability companies and public companies have a minimum paid up capital of Euro 12,000, 25.000 or 50.000 respectively. Major Banks and insurance companies are organised as public corporations unless using special vehicles for certain branches of investments including investments funds. Investment funds include open-ended forms investing in real estate, portfolios and other funds. Private equity investments are mainly constructed in corporate or partnership form. Trusts may be used to coordinate a family business or as holding for corporate investments. Trusts also act as non-profit organisation or in similar functions.

7. Company Incorporation

All companies running business are registered in a local register. This registration includes the names of the companies founders, partners and managing directors. The records of the register are deemed to be correct. This also applies to the list of shareholders to be file with the register upon any change of shareholders.
    Setting up a company can be done in one to two weeks, but will usually take longer if foreign shareholders are involved. Forming a corporation needs notary form including fixing the articles of association and any changes thereof. Partnerships are not formed in notary form but applied for to the commercial register. In contrary to a corporations files the records of a partnership in the register do not show the articles of association or similar items.
    Under EU law foreign companies being registered in An EU country have the right to apply for registration with the local register in the area of its seat of management. Currently a German company moving its seat to another country is deemed to be in liquidation and may loose its status as registered company in Germany.

8. Reporting & Auditing

The fiscal year is equal to the calendar year unless a company has a different year end for statutory purposes. any company has to file monthly and yearly tax returns on the basis of its financial statements for the previous year. Taxable income is computed on the basis of the statutory profit and loss statement amended by certain deviations for tax purposes. Usually companies pay monthly advances on VAT and quarterly advances on income taxes.
    Yearly returns are to be filed until the end of May of the following year. However this date may be normally extended until the end of that year. Tax payments are automatically subject to interest if the assessment is made after a skipping time of 15 months after the end of the fiscal year assessed. Medium sized and big companies are subject to tax audits regular basis. audit Requirements exist only for statutory purposes. Basically all companies which meet two of three tests in regard to turnover, balance sheet total and number of work face have to undergo an official audit. Such audit requirement covers medium sized companies, big companies as well as limited liability partnerships. Additional requirements refer to the audit of publicly held companies listed on a stock exchange.
     Any corporation and limited liability partnership have to disclose its financial statements in a special register. This also applies to non-audited firms. The extent of disclosure varies due to special rules exempting minor companies from overall disclosure.

9. Special Notes / Country Update

Germany has a very sophisticated legal and tax system. Due to the implications of EU law and the ongoing globalization permanent changes are made to adopt new laws and make Germany attractive to foreign investors. However high individual taxes and a lack of planning safety are still a handicap as well as the high labour cost caused by social security premiums to be absorbed by the employer.
   On the other hand, Germany has a relatively effective bureaucratic and very clear rules for investments and developing businesses. Foreign investors are treated equal to all other investors and have public guarantees in regard to permits, intellectual property and jurisdiction.

Double Taxation Agreement

Germany has double taxation treaty with different countries:

• Argentina
• Austria
• Bulgaria
• China
• Cyprus
• Czech Rep.
• France
• Hungry
• India
• Indonesia
• Israel
• Italy
• Japan
• Kuwait
• Malaysia
• Malta
• Mauritius
• Mexico
• Morocco
• Netherlands
• Poland
• Portugal
• Romania
• Russia
• Singapore
• Slovenia
• Spain
• Switzerland
• Tunisia
• Turkey
• UK
• Uruguay
• USA
• Venezuela

Offshore Company in France

1. Why France?

France possesses the fifth largest economy by nominal GDP eighth largest economy by purchasing power parity. France is the largest state in the Europe behind Russia and Ukraine, and has a very good infrastructure and communication networks: high speed trains (TGV) network, Euro star. France is also the top tourist destination worldwide, receiving 82 million foreign tourists annually.

2. Legal Framework

The French Legal System is constituted of a set of written and codified laws. The French legal system is characterized by the principle of separation between legislative, executive and judicial powers.

     The French legal system is divided into:

1. Public law- subdivided into several branches among which: constitutional law, administrative law, finance law, European law, and on public procurement law - and
2. Private law - divided into many branches among which: civil law, criminal law, company law, labor law.

3. Banking

The financial and banking sector plays an important role in the French economy. In late 2008, 36 French credit and investment institutions were listed on the Stock Exchange, and over the last ten years this sector has represented on average 2.7% of France's GDP. In 2008, 722 credit institutions were operating in France among which there were 394 banks with a network of 27,500 branches.

    However, over the last decade this sector has undergone a deep restructuring which has resulted in a significant decrease of the number of credit organizations. Consequently, today nearly half of the operating credit institutions belongs to only six groups.

4. Financial Regulatory Authority

French banking activity is regulated by different bodies, among which the French central bank (Banque de France), which is responsible for verifying the stability of the banking and financial system, and the respect of the compulsory legal; requirements in matter of financial ratios.

   The French central bank is part of the European Central Bank (ECB) and the European. It participates in the most important international debates: international Monetary Fund, meetings of G7 and G20, meetings of the Basel Committee on banking supervision.

    Beside the French national Bank, the financial Markets Authority (AMF) is an independent agency whose mission is to ensure the protection of saving investments and financial markets at the European and International level.

5. Taxation

5. a. Corporate Tax

The standard corporate tax rates amounts to 33.33%. An additional social security levy of 3.3%, calculated on the basis of the reference amount of corporate tax less Euros 763,000 is applied at the standard rate exceeds Euros 2,289,000.

      For small businesses (under conditions) the corporate tax rate amounts to 15% on the First Euros 38,120 profit, and then 33.33% on the remaining profits.

      Capital gains on the sale of shareholdings are totally exempt, except for the 5% representing expenses.

        Losses can be carried forward indefinitely. It is also possible to deduct the current year's losses from income in the 3 previous years (carry back). Moreover French businesses may be subject to others taxes such as: taxes on immovable, social taxes, etc..

5. b. Personal Tax Rates

Resident individual of France is taxed on his worldwide income while non resident individual of French is taxed on his individual French source income (or, if he is not resident of country having signed tax treaty with France and dispose of residence in France, on three times rental value if higher than their French source income) subject to tax treaty provisions.
    Individual income tax is assessed per household. total net income is total of net results of each taxpayer's income categories. Rates vary from 0% to maximum of 40% for 2010.


5. c. Social Security


The French Social Security system consists in two main statutory schemes:

1. The compulsory general scheme for all workers, covering health insurance unemployment insurance and pension scheme. Contributions are calculated on the basis of percentage rates decided at national level and are borne partly by employers and partly by employees. The total contributions rate of the general scheme varies depending on wages, from 19% to 21% of the wages for the employees, and  30% to 42% of the wages for the employers.
2. The health insurance scheme and the compulsory basic and supplementary pension schemes for self employed workers, which covers non-salaried workers.

The contribution rate depends on the basis of calculation (earnings) used and represents the average of 30% of gross income.


5. d. Customs & Excise Duties


As an EU member State, France customs regulations follow European Union Customs Procedures. In general goods from other EU member's state are subject to VAT, while good from outside the EU are subject to Customs and Excise rules.
   Exemptions of customs duties may apply to merchandise that merely passes through France, that stays in France only temporarily, that is imported in order to be re exported later after modification in France, or that is re imported after having been exported. Excise taxes apply to intra community transactions bearing on specific products such as mineral oil, alcohol, alcoholic beverages and tobacco. Said taxes become due when products are put on market at rates varying depending on nature of products.


5. e. V.A.T.


Value-added tax (VAT) is noncumulative tax levied at every stage of production, distribution, delivery of goods or services. Burden of tax is generally borne in final consumer.
Normal VAT rate is 19.6% and low rate is 5.5%.


5. f. Tax Incentives:


1. Research tax Credit- The French Research tax credit (RTC) is very attractive. It is the first support measure to encourage Research & Development in France. It represents a budget of Euro 3 bn in 2008 and concerns nearly subject to income tax, spending money on eligible expenses on research is entitled to benefit from the Research tax credit.


2.  Innovative young companies- Specific measures have been taken to help new companies whose R&D expenses represent at least 15% of their tax deductible costs. Conditions: small and medium-sized Companies with less than 250 employees, whose sales are inferior to Euro 50 m and total assets inferior to Euro 43 m. The incentive is granted for a period of eight years from the setting up of the company.


3.  Other Incentives- Besides the Research tax credit and the Innovative new Companies incentive, other tax credits are granted to certain sectors of activity: film and audiovisual industry, fashion and leather industries.

6. Main Types of Corporate Forms

1. Corporations in General - French corporations are either "societe anonyme" ("S.A."), "societe par actions simplifiee" ("S.A.S."), "societe en commandite par actions" ("S.C.A.") or "societe a responsabilite limitee" ("S.C.A.") or  "societe a responsabilite limitee" ("S.A.R.L."). Liability of shareholders of these companies is limited to amount of their investment.
2. Foreign corporations -  Such corporations desiring to do business in France through branch must comply with exchange control regulation. Foreign corporations doing business in France are subject to same taxation as French corporations for profits made in France, but with special provisions with regard to dividends.
3. Partnerships - French partnerships are either simple ("societes en commandite simple"), or special by shares ("societes en commandite par actions"). there is also form of association similar to joint venture ("societe en participation"). All forms of partnerships except "societe en participation" are subject to bankruptcy proceedings.

7. Company Incorporation

There are no administrative restrictions on foreign investments in France, but some business sectors require special declarations or permits, and some activities are regulated or require the possession of diplomas.

    Companies wishing to prospect for business in France can start by hiring one employee or opening a 'liaison office'. These two solutions do not involve the creation of a permanent establishment and there is no tax impact, as long as the company does not make any profit in France.

    If the company wants to open a permanent establishment in France, it can open a branch or a subsidiary. Both of them are permanent establishments subject to taxation in France, and must be registered with the registry of trade and companies ("Registre du commerce et des societes").

   The registration of a business (branch or subsidiary) takes 7 days on average. The cost of administrative formalities depends on the option. For a LTD, cost is approximately Euro 85 plus approximately Euro 250 for publishing a notice in the legal gazette.

8. Reporting & Auditing

1. Date of Accounts closure- There is no legal obligation in France concerning the date of closure of the accounts for business concerns. Actually most companies close their accounts on 31th December. For other entities including tax payers the fiscal year corresponds to the calender year. The tax declaration must be sent to the tax authorities within a 3- monthly period if the accounts are closed on 31st December. 
2. Appointment of an external auditor- This is compulsory in the case of joint stock companies and in some other types of entities (charities, foundations, or any type of organisation benefiting from public subsidies, mutual funds...) French SAS owned by Companies. The appointment of an external auditor is also compulsory for the other types of companies under certain conditions (revenue, number of employees, total balance sheet).

9. Special Notes / Country Update

1. Credit to consumer- Since 2003, the protection in consumer credit contracts has been strengthen. In compliance with EC Directive of February 16, 1988 any advertisement or any credit offer shall include statement of annual (and not monthly) percentage rate of charge.
2. Trust - Since February 19, 2007, France provides itself with a new legal vehicle allowing to create arrangements equivalent to the trusts of other countries: the "Fiducie".The French Fiducie  allows an independent patrimony to be created that is not that of the settler (the constituent) but which does not form part of that of the fiduciary either. Indeed, the latter is obliged to keep the transferred property, rights and securities separate from its own patrimony, which was not possible under former French Law.

Double Taxation Agreement

France has double Taxation Treaty with different countries:

·                     Argentina

·                     Austria

·                     brazil

·                     Bulgaria

·                     Cyprus

·                     Czech Rep.

·                     Germany

·                     Hungry

·                     India

·                     Indonesia

·                     Israel

·                     Italy

·                     Japan

·                     Kuwait

·                     Malaysia

·                     Malta

·                     Mauritius

·                     Mexico

·                     Morocco

·                     Netherlands

·                     Poland

·                     Portugal

·                     Romania

·                     Russia

·                     Singapore

·                     Slovenia

·                     Spain

·                     Switzerland

·                     Tunisia

·                     Turkey

·                     UAE

·                     UK

·                     USA

·                     Venezuela

Offshore Company in China

1. Why China?

China is a developing country and it's populations are more than 1,3 billion. Since Deng Xiaopin mastered China's political power in 1978, China has started to implemented political and economic reforms. Since then, annual growth rate of Chinese economy is 10%. China has formulated a series of laws and policies which are favorable to foreign investments. At the same , China's local governments provide various preferential conditions for foreign enterprises. China's large population and vast area provide unlimited business opportunities for foreign enterprises to invest in China.

2. Legal Framework

China's highest legal body is the National people's Congress, one of its duties is to approve laws submitted by relevant departments. The local governments may set up various regulations and rules which are suitable to the local areas. Foreign enterprises may establishing companies and run their business in China without violating Chinese laws, local regulations and rules. The foreign companies should pay taxes according to Chinese tax laws.

3. Banking

China's central bank is the people's Bank of China. China has 4 big state owned commercial banks, they are bank of China, Industrial and Commercial Bank of China Construction Bank. All these 4 banks handle deposits and loans of RMB and foreign currency. China Development Bank is also a state-owned bank, its main function is to serve significant long term national economic development strategy through handling deposits and loan of RMB and foreign currency. China has many private banks, some of them handle deposits and loans of RMB and foreign currency and some only handle deposits and loans of RMB.

4. Financial Regulatory Authority

China has the State-owned Assets Supervision and Administration Commission of the State Council, China Securities Regulatory Commission, these 3 institutions main function is to supervise and manage China's financial markets and they have their own branches in each province of china.

5. Taxation

5. a. Corporate Tax

The income tax rate for domestic and foreign enterprise is uniformly 25%; small-profit enterprise's income tax rate was 20%; high-tech enterprise income tax rate is 15%.


5. b. Personal Tax Rates 


Personal income tax rate has nine levels from 5% to 40%. Tax exemption amount of personal income tax for Chinese employee is RMB Yuan 2,000, for foreign employee is RMB Yuan 4,800.


5. c. Social Security


Social security tax includes five categories: life insurance tax, medical insurance tax, unemployment insurance tax, industrial injury insurance tax and birth insurance tax. These 5 Taxes account for 42.3% of personal wage and they are borne by company and individual together, the company will pay 32.1% and individual will pay 10.2%.


5. d. Customs & Excise Duties


The imported goods need to pay custom duties. the tax rates are decided by goods customs duty is 17%. The excise duties will be levied for the following four categories of goods:

1. special goods, which over-consumed will be harmful to health, social order and ecological environment (Tobacco, Alcohal, Firecrackers, Fireworks);
2. Luxury goods and other non-necessary life goods (Precious jewelry and jade jewelry, cosmetics);
3. High energy-consumed luxury goods (Cars, Motorcycles);
4. Non-reproduced and non-alternative resource goods. (Gasoline, Diesel).

Also imported and exported diamonds need to go to the Shanghai Diamond Exchange for their custom clearance procedures, other ports can import and export diamonds.


5. e. V.A.T.


China's value added tax rates are different according to different taxpayers. Small scale taxpayers tax rate is 3%, special industry's tax rate is 13% and general taxpayer's tax rate is 17%.


5. f. Tax Incentives


The central and local governments have formulated various tax preferential policies to encourage foreign investment in China.

6. Main Types of  Corporate Forms

China's main types of Chinese companiesL: State-owned company, joint-stock company, limited liability company, partnership firm and sole proprietorship. Different limited liability companies registered capitals will not be less than the following minimum amounts:

1. The minimum registered capital of limited company engaging in production & operation company is RMB Yuan 500,000;
2. The minimum registered capital of company engaging in commodity wholesale is RMB Yuan 500,000;
3. The minimum registered capital of commercial; retail based company is RMB Yuan 300,000;
4. The minimum registered capital of company engaging in technology development, consulting and service is RMB Yuan 100,000.
5. The minimum registered capitals of joint-stock company and listed company are RMB Yuan 10 million and 50 million respectively.

7. Company Incorporation

The procedures for foreign investor to establish a company ion China are as follows:

Establishment of project: foreigner should have its foreign business license(registered certificate), ID card or power of attorney and fill in form of establishing enterprise in china (3 days after all materials are submitted);

Approval of the feasibility study report and articles of association(10 days);

Business license is approved by the local industry and Commerce Administration (2 days).

8. Reporting & Auditing

The financial year of Chinese company is from January 1 to December 31, foreign company can also choose a different financial year. China's tax authorities annually audit the financial statements of Chinese and foreign companies.

9. Special Notes / Country Update

China has carried out tax reforms several times, the Chinese and Foreign companies enjoy the same favorable tax rates and treatments.

Double Taxation Agreement

China has double taxation treaty with different countries:

·                     Austria

·                     brazil

·                     Bulgaria

·                     Cyprus

·                     Czech Rep.

·                     France

·                     Germany

·                     Hungry

·                     India

·                     Indonesia

·                     Israel

·                     Italy

·                     Japan

·                     Kuwait

·                     Malaysia

·                     Malta

·                     Mauritius

·                     Mexico

·                     Morocco

·                     Netherlands

·                     Poland

·                     Portugal

·                     Romania

·                     Russia

·                     Singapore

·                     Slovenia

·                     Spain

·                     Switzerland

·                     Tunisia

·                     Turkey

·                     UAE

·                     UK

·                     USA

·                     Venezuela