Legal Rules on Business Tax

Legal Rules on Business Tax
Business tax is a type of turnover tax levied on the business income of entities and individuals who provide taxable services, transfer intangible assets, or sell real estate within the territory of China. The newly revised Provisional Regulations of the People's Republic of China on Business Tax were passed at the 34th Executive Meeting of the State Council on November 5, 2008, and came into effect on January 1, 2009.
(I) Taxpayers of business tax
Taxpayers of business tax refer to entities and individuals that provide taxable services, transfer intangible assets, or sell real estate within the territory of China.
(II) Incidence of taxation of business tax
The incidence of taxation of business tax includes the provision of taxable services, transfer of intangible assets, and sales of real estate. Wherein, the provision of taxable services refers to the provision of transportation, construction, finance and insurance, postal and telecommunications, cultural and sports, entertainment, and other services. The business tax has a total of 8 tax items, which are:
(1) Transportation industry. Transportation industry refers to the labor service activities that use means of transport, manpower, or animal power to deliver goods or passengers to their destinations, so as to transfer their spatial location. Specifically, it includes land transport, waterway transport, air transport, pipeline transport, loading and unloading, and handling.
(2) Construction industry. Construction industry refers to the construction and installation operations. Specifically, it includes construction, installation, repair, decoration, and other engineering operations.
(3) Finance and insurance industry. Finance and insurance industry refers to the business of managing and operating finance and insurance. Specifically, it includes the financial industry and insurance industry.
(4) Posts and telecommunications industry. Post and telecommunications industry refers to the specialized business of handling information transmission. Specifically, it includes postal services and telecommunications.
(5) Cultural and sports industry. Cultural and sports industry refers to the business of managing and operating cultural and sports events. Specifically, it includes cultural industry and sports industry.
(6) Entertainment industry. Entertainment industry refers to the business of providing venues and services for entertainment activities. Specifically, it includes KTVs, dance halls, music cafes, billiards, golf, bowling, carnival, shooting, hunting, horse racing, games, Internet cafes, and other entertainment venues, as well as the businesses provided by such venues for customers to engage in entertainment activities.
(7) Service industry. Service industry refers to the business of providing services to the public using equipment, tools, venues, information, or skills.
(8) Transfer of intangible assets and sale of real estate. Specifically, it includes transfer of land use rights, trademark rights, patent rights, non-patented technology, copyrights, and goodwill.
(III) Business tax rate
Business tax applies proportional tax rate, and different tax rates are set for different tax items, for example, 3% for transportation, construction, post and telecommunications, and cultural and sports industries, 5% for finance and insurance industry, service industry, transfer of intangible assets, and sales of real estate, and 5% to 20% for entertainment industry. The basis of taxation for business tax is the total income from providing labor services or selling goods, and its calculation formula is as follows: tax payable = turnover * tax rate.
(IV) Tax exemption and reduction
The following items are exempt from business tax:
(1) Nursing services provided by nurseries, kindergartens, nursing homes, and welfare institutions for the disabled, as well as matchmaking and funeral services;
(2) Labor services provided by individuals with disabilities;
(3) Medical services provided by hospitals, clinics, and other medical institutions;
(4) Educational services provided by schools and other educational institutions, as well as services provided by students through work-study programs;
(5) Agricultural mechanical farming, irrigation and drainage, control of plant diseases and insect pests, plant protection, agricultural and animal husbandry insurance, and related technical training services, as well as breeding and disease control of poultry, livestock, and aquatic animals;
(6) Admission fees for cultural events held in memorial halls, museums, cultural centers, art galleries, exhibition halls, calligraphy and painting academies, libraries, cultural relics protection entities, and religious venues, as well as admission fees for religious activities held in religious venues;
(7) Insurance products provided by domestic insurers for export goods.
Except as provided in the preceding paragraph, the items qualified for exemption and reduction of business tax shall be stipulated by the State Council. No region or authority shall stipulate any items qualified for exemption or reduction.
A taxpayer who is also engaged in business of items qualified for exemption or reduction, in addition to other items, shall separately account for the turnover of such items, and shall not be entitled to exemption or reduction if the turnover has not been separately accounted for.
(V) Payment of taxes
1. Time of occurrence of tax obligation
The tax obligation of business tax occurs on the day when the taxpayer receives the business income payment or obtains the proof of business income payment.
2. Tax payment places
(1) A taxpayer providing taxable services shall declare and pay taxes to the local tax authority in the place where the taxable services are provided. A taxpayer engaged in the transportation business shall declare and pay taxes to the local tax authority in the place where their premise is located.
(2) A taxpayer transferring land use right shall declare and pay taxes to the local tax authority in the place where the land is located. A taxpayer transferring other intangible assets shall declare and pay taxes to the tax authority in the place where their premise or domicile is located.
(3) A taxpayer selling or leasing real estate shall declare and pay taxes to the tax authority in the place where the real estate is located.
3. Tax payment period
The tax payment period of business tax shall be 5 days, 10 days, 15 days, 1 month, or 1 quarter. A taxpayer shall pay taxes over the tax payment periods determined by the competent tax authority based on the amounts of taxes payable, or pay taxes on a transaction basis if their taxes cannot be assessed in regular periods.
A taxpayer shall declare and pay taxes within 10 days from the expiration date if their taxes are payable on a monthly or quarterly basis, or prepay taxes within 5 days from the expiration date and declare and pay them within 10 days from the first day of the following month if their taxes are payable within a period of 5, 10, or 15 days.
(VI) Taxation administration
The collection and management of business tax shall be subject to the applicable provisions of The Law of the People's Republic of China on the Administration of Tax Collection and the Provisional Regulations on Business Tax.