Doing Business With the People's Republic of China: Tax Considerations

This article provides a framework of China’s tax system for use as a resource by those companies doing business in, and with, China. The article discusses Chinese tax rates and implementation. The article discusses the domestic and foreign tax liabilities American companies must consider when doing business in China. The author aims to provide tax insights that companies doing business in China can utilize when making business decisions.
The article first describes the changes in Chinese tax policy undertaken by the Communists since their rise to power. The article addresses sales and commodity taxes, which are the major components in China’s tax system. The article examines the 1958 tax consolidation and its impact on Western companies. The article discusses the process of paying Chinese taxes and explains the decreasing applicability of the Chinese income tax. The article contemplates possible changes to China’s tax policy by studying other Communist countries as well as China’s recent joint venture laws. The article next addresses American companies’ tax liabilities, in China and at home. While American companies will not be significantly impacted by Chinese taxes, the author feels they should negotiate for better tax considerations in exchange for doing business in China. American companies doing business in China should also examine United States Tax Code benefits by considering foreign tax credits, deductions and exemptions.