Document Type



Taxation-Transnational | Tax Law


In 1980, the People’s Republic of China adopted an income tax on joint ventures and individuals. These two taxes have created great speculation since the passage of the Chinese Joint Venture Law in 1979, which created rules and procedures for foreign investors. Much of this interest arises due to the common misconceptions surrounding China’s tax structure. After the enactment of the two aforementioned taxes, eleven distinct taxes exist in China.

This article examines the consolidated industrial and commercial tax and various income taxes, which are most relevant to foreigners. Section I describes the consolidated industrial and commercial tax. Section II explains the industrial and commercial income tax. Sections III and IV detail the individual income tax and joint venture income tax. Section V analyzes the tax regime that applies to China’s “free trade” zones. Section VI discusses whether the individual and joint venture income taxes can be credited as a United States foreign tax credit. This section further examines the modifications necessary for China to implement its own foreign tax credit, and the differences between the OECD and United Nations tax treaty models. The article concludes by lauding the important achievement of implementing new tax laws on joint ventures and individuals, and explaining that the Chinese tax system will become more sophisticated as China’s tax officials become more experienced.