Enterprise Income Tax, China
China’s Enterprise Income Tax (EIT) is the world’s largest corporate income tax by revenue, contributes a significant share to China’s total tax revenue, and is clearly the most substantial component of capital taxation in China. Yet scholarly research on the EIT is still limited. This overview chapter outlines the EIT’s main components from a legal perspective, while referring to empirical economic and accounting research that sheds light on these components. It discusses the personal scope of the EIT, so as to identify the significance of the pass-through and the tax-exempt sectors relative to the taxable corporate sector. It then examines a range of determinants of the effective EIT burden for corporate taxpayers, including the graduated rate structure, tax exemptions and rate reductions, local tax rebates, modifications of the income tax base, and income tax accounting rules. It also considers key rules governing transactions between a corporation and its shareholders and the treatment of corporate reorganizations and groups. One theme that emerges is that because the Chinese personal income tax (PIT) remains under-developed, EIT rules are the most important area in which income tax norms are elaborated, but the crudeness of PIT rules also limits the complexity of EIT rules.
Wei Cui, "The Chinese Enterprise Income Tax" in Avi-Yonah, ed, Research Handbook on Corporate Taxation [forthcoming].