TAX RATES AND ALLOWANCES
The following tax rates and allowances are to be used in answering the questions.
Individual income tax
Entrepreneurs who receive production or operation income derived from private industrial or commercial enterprises
Individual service income
Before tax income Rate Quick deduction factor
(RMB) (RMB)
Up to and including 20,000 20% 0
Over 20,000 to 50,000 30% 2,000
Over 50,000 40% 7,000
Allowance each time for individual service income, income from manuscripts, royalties and rental of property
RMB4,000 and below RMB 800
Over RMB4,000 20%
Income from manuscripts, royalties, interest, dividends, rental of property,
transfer of property, incidental income and other income 20%
Donations of individuals
Limited to: 30% of the taxable income; or
100% if the donation is made to certain funds approved by the government
Value added tax (VAT)
Rate
For importation of goods depending on the itemised goods 17%/13%
For small-scale taxpayers
and simplified method 3%
For general taxpayers for the sale of itemised goods, processing, and repairing 17%
for the sale or import of itemised goods 13%
input tax credit for agricultural products 13%
VAT pilot programme
Industries Rate
Transportation, postal and certain telecom services 11%
R&D and technical services, IT services, cultural and innovation services,
logistics auxiliary services, attestation and consulting services, and broadcasting,
film and television services, certain telecom services 6%
Tangible movable property leasing services 17%
Note: The above rates are based on the pilot rules published by 30 September 2014. The new rules effective from
1 October 2014 are not examinable in the 2015 exams.
Business tax
Industries Rate
Construction, culture and sports 3%
Finance and insurance, services, transfer of intangible property, sale of immovable property 5%
Entertainment 5%~20%
T Ltd is a monthly taxpayer for value added tax (VAT) and business tax (BT).
What is T Ltd’s monthly tax filing deadlines for value added tax (VAT) and business tax (BT) respectively?
VAT monthly filing deadline BT monthly filing deadline
(days after the month end) (days after the month end)
A corporate taxpayer has under-reported its taxable revenue in 2002 and hence underpaid value added tax (VAT) and enterprise income tax (EIT). In 2014, the taxpayer was charged by the tax authority with committing an act of tax evasion in 2002.
Which of the following statements is correct?
Per Article 86 of the Tax Collection and Administrative Law, the statute of limitation for an administrative penalty on non-compliances is five years.
Co X, a US company, owned 30% of the equity of a Chinese company, Co A. Co X sold all of the equity in Co A at a profit to a UK company, Co Y.
Which of the following statements are correct?
(1) Co X is the taxpayer for China enterprise income tax (EIT)
(2) Co Y is the withholding agent for China EIT
(3) Co A is the withholding agent for China EIT
(4) The EIT should be filed at the place where Co A is located
Which of the following authorities promulgates the Tax Collection and Administrative Law?
In 2014 Mr Yuan inherited an estate of RMB2 million from his uncle who had died two months earlier.
What is the correct treatment of the estate income for individual income tax purposes?
Which of the following are deemed sales for value added tax (VAT) purposes?
(1) The sale of a package of shampoo together with a sample of hair conditioner
(2) A sample of hair conditioner given to the walk-in customers to a department store
(3) Finished goods delivered to a warehouse in another city for storage
(4) Fixed assets contributed as a capital injection to a subsidiary
(5) Accountancy services provided free-of-charge to a non-government organisation for charity purposes
Delivery of finished goods to a branch in another city for sale is a deemed sale for VAT purposes but delivery to a branch for storage is not a deemed sale.
A company has value added tax (VAT) special invoices for the following items in October 2014:
(20,000 + 180,000) = RMB200,000
In June 2014, a property management company collected a total of RMB250,000 from the property landlords, of which RMB100,000 was for the water and electricity allocated to the landlords and RMB120,000 was for the salaries of the security guards.
How much business tax (BT) should the property management company pay in June 2014?
(250,000 – 100,000) x 5% = RMB7,500
A Chinese company has borrowed a USD500,000 loan from an overseas bank. Interest on the loan is accrued and paid annually at the rate of 12% per annum. The relevant business tax rate is 5% and neither surcharges nor treaty relief apply.
What is the amount of enterprise income tax (EIT) the Chinese borrower needs to withhold from the annual interest paid to the overseas bank?
USD500,000 x 12% x 10% = USD6,000
Mr Li, a photographer, had his photos published in the July 2014 edition of the tourism journal. The total fee was RMB20,000 and the publisher agreed to pay Mr Li by two instalments, one of RMB18,000 in June 2014 and the balance of RMB2,000 in August 2014. The same photos were republished by the government in a promotion brochure in August 2014 and Mr Li was paid a further fee of RMB3,000 by the government.
What is the total amount of individual income tax (IIT) which Mr Li will pay on the above incomes?
20,000 x (1 – 20%) x 20% x 70% + (3,000 – 800) x 20% x 70% = RMB2,548
ABC Ltd, a consultancy company based in the Macau Special Administrative Region, provided consultancy services to a client in Shanghai. According to the service contract, ABC Ltd will receive a fee, net of value added tax (VAT), of RMB500,000. The Shanghai tax authority considers that ABC Ltd has a China permanent establishment and so has assessed ABC Ltd to enterprise income tax (EIT) on the service fee based on a deemed profit rate of 20%. Consultancy service fees are subject to VAT at the rate of 6%.
How much enterprise income tax (EIT) will ABC Ltd have to pay on the service fee?
500,000 x 20% x 25% = RMB25,000
Which one of the following taxes is administered by the local offices of the State Administration of Taxation (State Tax Bureau)?
Which of the following transactions is subject to an immediate charge to land appreciation tax (LAT)?
Company Mi of Dalian imported equipment from the UK with a value of RMB1,000,000 at CIF (cost, insurance and freight). In addition, Company Mi has paid the following expenses relating to the equipment:
(1,000,000 + 44,000 + 66,000) x 10% = RMB111,000
In January 2014, Cig Ltd purchased tobacco for RMB60,000 and produced and sold cigarettes for RMB200,000. Cig Ltd’s inventory of tobacco was RMB10,000 on 1 January 2014 and RMB13,000 on 31 January 2014. Cig Ltd pays consumption tax (CT) on all the tobacco it purchases. The CT rate for both tobacco and cigarettes is 30%.
What is the amount of consumption tax (CT) payable by Cig Ltd in January 2014?
[200,000 – (10,000 + 60,000 – 13,000)] x 30% = RMB42,900