China Corporate Tax Guide 2026

Overview — Enterprise Income Tax

Enterprise Income Tax (EIT / 企业所得税) is China's corporate income tax, levied on resident enterprises (incorporated or effectively managed in China) on their worldwide income. Non-resident enterprises are taxed only on China-sourced income. The standard EIT rate is 25%, though significant preferential rates apply for qualifying enterprises. The tax year runs from 1 January to 31 December, with quarterly provisional filings and an annual reconciliation. The State Taxation Administration (STA) administers EIT. All amounts are in Chinese Yuan (CNY).

Standard Rate — 25%

The standard EIT rate of 25% applies to most resident enterprises. Taxable income is calculated as revenue minus deductible expenses (cost of goods sold, operating expenses, depreciation, amortisation, interest, salaries, R&D expenses, and other ordinary and necessary business expenses). Key features: tax losses can be carried forward 5 years (10 years for certain hi-tech and SME losses); capital gains are included in ordinary income at the full 25% rate (no separate capital gains rate); dividend income from other resident enterprises is generally exempt from EIT (subject to holding period and other conditions).

Reduced Rate — 15% for Hi-Tech Enterprises

Qualified High and New Technology Enterprises (高新科技企业 / HNTE) benefit from a reduced EIT rate of 15%. Qualification requires: registration in China, core intellectual property ownership (patents, software copyrights, IC layout designs), R&D expenditure ≥ 3% of revenue (depending on revenue scale), hi-tech product revenue ≥ 60% of total revenue, and a ratio of technical staff ≥ 10% of total employees. The HNTE certificate is valid for 3 years and must be renewed. This is China's primary tax incentive for innovation, used by thousands of companies in technology parks and development zones. Many multinationals structure their China R&D operations to qualify for this incentive.

Reduced Rate — 15% for Small Low-Profit Enterprises

Small Low-Profit Enterprises (小型微利企业) with annual taxable income below RMB 1 million and certain asset/employee thresholds qualify for a reduced effective rate of 5% (calculated as 20% rate on 25% of income). For income between RMB 1 million and RMB 3 million, the effective rate is 10% (20% rate on 50% of income). These preferential rates are designed to support small businesses. The threshold and calculation method are subject to annual policy adjustments. The asset limit is approximately RMB 50 million and the employee limit is 300.

Reduced Rate — 10% for Encouraged Industries

Certain encouraged industries in designated regions qualify for a reduced EIT rate of 10–15%. Key zones include: Western China Development (鼓励类产业企业 in western provinces — 15% rate through 2030), Hainan Free Trade Port (15% for encouraged industries registered in Hainan, plus additional incentives for tourism, modern services, and hi-tech sectors), Shanghai Lingang (15% for certain AI, IC, and biotech companies), and Pilot Free Trade Zones (selective incentives based on industry and zone). Approval is required and the qualifying industry catalogue is periodically updated by the NDRC.

Transfer Pricing Rules

China has comprehensive transfer pricing rules aligned with OECD guidelines. Related-party transactions must be conducted at arm's length. Documentation requirements include: Master File, Local File, and Country-by-Country (CbC) Report (for MNE groups with consolidated revenue above RMB 5.5 billion). Annual related-party transaction reporting is required on the Special Tax Investigation Adjustment form. The STA conducts transfer pricing audits (special tax investigations / 特别纳税调整), with penalties of up to 200% of the tax adjustment plus daily interest charges (approximately 5% above the benchmark lending rate). China has a robust Advance Pricing Agreement (APA) programme — unilateral, bilateral, and multilateral APAs are available. Key risk areas: service fee payments to overseas parents, royalty payments for technology and brand use, high-value intercompany financing, and management fees. China has also introduced general anti-avoidance rules (GAAR) that allow the STA to recharacterise transactions lacking a reasonable commercial purpose.

R&D Super Deduction

China offers an R&D super deduction for qualifying R&D expenses. As of 2026, eligible R&D expenses (salaries, materials, depreciation, outsourcing) are deductible at 100% of actual expenditure (i.e., an additional 100% deduction, making the total deduction 200%). This applies to all resident enterprises conducting qualifying R&D activities (not just HNTE companies). Unused deductions can be carried forward. The super deduction significantly reduces the effective EIT rate on R&D-intensive businesses.

Dividend Withholding and Branch Profits

Dividends paid by a Chinese resident enterprise to its non-resident parent company are subject to 10% withholding tax (reduced under tax treaties, e.g., 5% for ≥ 25% shareholding under several treaties). Dividends paid to tax treaty countries with a holding threshold (typically 25%) may qualify for a reduced rate. Branch profits of non-resident enterprises are subject to a 10% branch profits tax (treaty-reduced in some cases). Dividends between Chinese resident enterprises are exempt from EIT.

FAQs

What is the standard corporate tax rate in China?

The standard Enterprise Income Tax rate is 25% on taxable income. This applies to most resident enterprises unless they qualify for a preferential rate.

How long does an HNTE certificate last?

The High and New Technology Enterprise (HNTE) certificate is valid for 3 years. After expiry, the enterprise must re-apply and requalify. The 15% reduced rate applies only during the validity period.

Are losses carried forward?

Yes. Tax losses can be carried forward for 5 years (10 years for hi-tech enterprises and small low-profit enterprises). Loss carryback is not permitted. Losses from foreign branches cannot offset domestic income.

What transfer pricing documentation is required?

Chinese subsidiaries of MNE groups with revenue above certain thresholds must prepare a Master File, Local File, and CbC Report. Related-party transaction forms must be filed annually with the EIT return. The threshold for CbC reporting is RMB 5.5 billion in consolidated group revenue.

Disclaimer

This guide provides general information about China's Enterprise Income Tax for 2026. Tax laws, rates, and incentives are subject to change. The information is based on published STA regulations and may not reflect your specific business circumstances. Always consult with a qualified Chinese tax advisor for advice specific to your situation. InvestmentKit does not provide tax advice.