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Brief Introduction on Finance and Taxation Practice of Individual Business in China

2025-07-09
Individual business refers to natural person or family that are legally approved and registered to engage in industrial and commercial activities within the permitted scope. Individual business shall have the rights to process, utilize, profit and dispose the lawful properties as well as to enjoy all kinds of crediter’s rights based on laws and contracts.

  1. The investor of individual business shall bear unlimited joint and several liability

    According to the Civial Code of The People’s Republic of China, individual shall assume debts with personal properties if the individual business operated by individual; Family shall assume debts with family properties if the individual business operated by family; If it is hard to distinguish the operator of the individual business, family shall assume debts with family properties.

    Therefore, the investor of individual business is different from the shareholders of limited liability companies and shall bear unlimited joint and several liability for debts iccured during the operation period.

  2. Eligible individual business shall do book-keeping

    According to Interim Measures for the Management of Book-keeping for Individual Business, individual business shall have double entry accounts if meets one of the following circumstances:
    (1)
    		 The registered capital is over RMB200,000;
    (2)
    		 The monthly sales revenue is over RMB40,000 for VAT taxpayers who engage in taxable services; The monthly sales revenue is over RMB60,000 for VAT taxpayers who engage in production;  The monthly sales revenue is over RMB80,000 for VAT taxpayers who engage in wholesale of retail of goods.
    (3)
    		 Other circumstances determined by the provincial tax authorities that double entry accounts shall be applied.

  3. Individual business may not open bank account

    Individual business may not open bank account but to make transactions through personal account of the investor.

  4. VAT preferential policy for individual business

    According to tax law of China, enterprise and individual business whose VAT sales revenue exceeds the prescribed standard but has few taxable transactions may choose to pay VAT as small-scale taxpayers., the relevant provisions are as following:
    (1)
    		 From 1 March 2020 to 31 December 2021, the tax rate for taxable income of individual business will be reduced from 3% to 1%.
    (2)
    		 From 1 April 2021 to 31 December 2022, VAT can be exempted for individual business whose monthly taxable income is no more than RMB150,000(quarterly taxable income is no more than RMB450,000).

  5. IIT preferential policy for individual business

    From 1 January 2021 to 31 December 2022, small & low-profit enterprise and individual business are allowed to pay 50% income tax based on current preferential policy for the part of taxable income that is no more RMB1,000,000.

  6. Individual business no need to pay CIT and disability employment fund

    According to tax law of China, the disability employment fund refers to the fund paid by government authorities, organizations, enterprises, public institutions and private non-enterprises who fail to have disabled employees in accordance with the regulations to protect the rights and interests of the disabled.

  7. Deed Tax exemption for individual business

    Deed Tax can be exempted for the owner of individual business to transfer the ownership of house and land property to individual business, or individual business transfer the ownership of house and land property to the owner of individual business.

  8. Nondeductible expenses for operating income of individual business

    (1)
    		 Individual income tax;
    (2)
    		 Overdue fine of tax;
    (3)
    		 Losses of fine and confiscated property;
    (4)
    		 Donations that do not comply with the deductible rules;
    (5)
    		 Sponsorship expenses;
    (6)
    		 Expenses of individuals and families. For expenses that is difficult to distinguish operation costs from personal or family use are allowed to be deducted at 40% before tax;
    (7)
    		 Other expenses that is irrelated to the operation;
    (8)
    		 Expenses that not allowed to be deducted as stipulated by the State Administration of Taxation.

KAIZEN Group is equipped with experienced and highly qualified professional consultants and is therefore well positioned to provide professional advices and services in respect of the formation and registration of company, application for various business licences and permits, company compliance, tax planning, audit and accounting in China. Please call and talk to our professional consultants for details.

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All information in this article is only for the purpose of information sharing, instead of professional suggestion. Kaizen will not assume any responsibility for loss or damage.

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