Develop practical China tax skills through 20 original questions and 60 substantive lessons covering administration, individual and enterprise income, property appreciation, indirect taxes and digital computations. Work through income classification, book-to-tax adjustments, deduction limits, progressive calculations and payment reconciliations. This representative preview combines multiple-choice items with written and spreadsheet-style tasks; it is not a full mock examination. Scope matches the June 2026, December 2026 and June 2027 TX-CHN guide as of 16 October 2026, including its VAT Law exclusion. Numerical exercise assumptions are supplied explicitly. Citations establish syllabus relevance; the supplied outline does not independently verify every technical rule or replace the absent examinable-documents list.
What this guide covers
Practise China tax calculations with 20 original questions and 60 concepts for the 2026–27 TX-CHN syllabus.
The PRC tax system and its administration
1. Revenue, redistribution and corrective taxation
Taxation finances public expenditure, redistributes purchasing power and influences economic behaviour. These functions can overlap: a tax on selected consumption may both raise revenue and discourage a socially costly activity. Analyse the tax base, rate structure and behavioural response separately. A progressive income tax changes the distribution of disposable income, whereas a targeted incentive changes the relative return from an activity. Higher statutory rates do not mechanically guarantee proportionately higher receipts because taxpayers can change transactions, timing or consumption within the law.
Worked example: Suppose a hypothetical levy of RMB2 per unit reduces sales from 100,000 to 90,000 units. Revenue becomes RMB180,000, while consumption falls by 10,000 units. The measure therefore has both a financing effect and a behavioural effect.
Common mistake: Assuming every tax exists only to raise money overlooks redistribution and behavioural objectives that can explain its design.
Official syllabus reference: [2]
2. Tax classification versus economic incidence
Direct taxes attach to a taxpayer's income or another directly assessed base; indirect taxes operate through transactions or consumption. The person legally responsible for remitting tax need not bear its entire economic burden. A seller may pass some VAT through prices, absorb some through lower margins or shift some through supplier negotiations. This incidence depends on market responses rather than the classification alone. In a tax explanation, identify the legal taxpayer, the taxable event and the possible economic bearer as three separate questions.
Worked example: A business keeps its VAT-inclusive selling price unchanged after a tax increase because competitors hold their prices. Its margin falls. VAT remains an indirect tax even though the business absorbs more of the economic burden through that pricing decision.
Common mistake: Calling a tax direct merely because the business pays it confuses the remittance obligation with its classification and incidence.
Official syllabus reference: [2]
3. Legislation hierarchy and examinable effective dates
A tax analysis must identify the governing legislation, implementing rules and administrative guidance, then consider their authority and effective dates. Publication, formal passage and commencement are different events. For this TX-CHN version, the supplied guide uses legislation passed by 30 September 2025 for June and December 2026 and exceptionally June 2027, subject to effective-date rules. It expressly excludes changes under the VAT Law effective from January 2026. Consequently, contemporary business treatment and examinable treatment can differ; the examination's stated boundary controls this guide.
Worked example: A candidate encounters an article describing a VAT change effective in January 2026. Before changing an examination computation, the candidate checks the supplied syllabus exclusion and retains the examinable treatment. The article's publication date does not override that explicit boundary.
Common mistake: Using every law currently effective in practice can introduce material expressly excluded from the specified examination syllabus.
Official syllabus reference: [2]
4. Withholding, provisional payments and final assessment
Withholding places a collection obligation on a payer, while self-assessment requires the taxpayer to determine and report the relevant liability. Provisional payments and withholding may settle part of an eventual annual assessment without determining that assessment conclusively. Reconciliation therefore separates income measurement, tax computation and payment credits. Multiple payers, changed deductions or income outside payroll can create a final balance. Identify whose reporting obligation is being tested; the taxpayer's filing responsibility and a payer's collection responsibility are related but distinct compliance duties.
Worked example: Assume an individual's annual liability is RMB46,000 and two employers have withheld RMB21,000 and RMB18,000. Crediting both payments leaves RMB7,000 payable. Neither employer's separate withholding figure substitutes for the individual's annual computation across the relevant income.
Common mistake: Treating tax withheld as necessarily final prevents correct reconciliation when income must be aggregated or deductions adjusted annually.
Official syllabus reference: [2]
5. Separate filing and payment deadlines
A return deadline governs delivery of information; a payment deadline governs settlement of tax. An extension or correction affecting one obligation should not automatically be treated as changing the other. Construct a compliance calendar by tax, period, responsible person and required action. Distinguish provisional returns from annual reconciliations and ordinary filings from information requests. Where a problem supplies a deadline or extension, apply its stated scope precisely. A timely return can coexist with late tax, and timely payment can coexist with an incomplete or late return.
Worked example: Assume a notice extends a return deadline to 20 May but expressly leaves payment due on 10 May. A business filing on 18 May and paying on 18 May meets the extended filing date but still has a late-payment issue.
Common mistake: Assuming a filing extension automatically postpones payment can misclassify an otherwise timely return as complete compliance.
Official syllabus reference: [2]
6. Tax books, invoices and evidential reconciliation
Tax records connect reported receipts, deductible expenditure and tax payments to supporting transactions. Books organise the amounts, while contracts, invoices, payment evidence and asset schedules establish their character and timing. An invoice alone does not make private expenditure deductible, and a bank payment alone does not prove entitlement to an input VAT credit. Reconcile sales records to returns and distinguish accounting recognition from tax adjustments. The syllabus concerns record-keeping obligations under tax rules; separate accounting-law retention obligations are expressly outside the supplied version's stated scope.
Worked example: A ledger shows RMB80,000 of equipment purchases, but the asset schedule identifies RMB20,000 as personal expenditure by an owner. Reconciliation separates that amount before considering tax depreciation. The invoice total alone does not establish the enterprise's deductible business asset base.
Common mistake: Treating possession of an invoice as sufficient proof of every tax deduction overlooks business purpose, eligibility and timing.
Official syllabus reference: [2]
7. Enquiries and estimated assessments
A tax enquiry tests the accuracy and completeness of a taxpayer's reported position. The authority may seek explanations, inspect records and reconcile reported amounts with external evidence. Where records are unreliable and the applicable rules permit estimation, assessment may use an authorised deemed basis rather than the taxpayer's unsupported profit figure. An estimated assessment is a method of measuring liability, not automatically a penalty. Analyse the reason for the enquiry, the evidential gap and the measurement method separately before considering any additional consequences of non-compliance.
Worked example: Assume unreliable books permit deemed taxable profit at 15% of verified revenue. With revenue of RMB2,000,000, deemed profit is RMB300,000. This establishes the assumed assessment base; any penalty for record failures would require a separate rule and separate calculation.
Common mistake: Calling an estimated profit assessment a fine confuses measurement of the underlying tax with punishment for a compliance failure.
Official syllabus reference: [2]
8. Tax disputes and administrative review
Dispute procedures depend on the nature of the contested decision. A disagreement over tax assessed is not necessarily routed in the same way as a challenge to a penalty or enforcement action. For a tax-payment dispute, consider the required payment or security condition and administrative-review stage before court proceedings, where applicable. Identify the decision, issuing authority, notification date and available remedy. Do not assume that submitting an objection suspends payment or enforcement. Exact procedural periods and preconditions must come from the applicable question materials or examinable rules.
Worked example: A company disputes an assessed tax amount rather than a separate fine. Its adviser first identifies the tax-dispute route and checks whether payment or acceptable security is required before administrative review. Simply sending an objection letter does not establish that collection is suspended.
Common mistake: Using one appeal route for tax assessments, penalties and enforcement decisions overlooks procedural distinctions that can determine admissibility.
Official syllabus reference: [2]
9. Late-payment charges versus non-compliance penalties
Late-payment charges compensate for unpaid tax over a chargeable period, whereas penalties address specified failures such as inaccurate reporting or non-filing. They have different triggers and should be calculated separately. For a daily charge, establish unpaid principal, applicable days, any intervening payments and the supplied rate. A partial payment can change the base for later days. Do not infer a penalty percentage merely from a late-payment calculation. The supplied syllabus also excludes reduction of penalties for voluntary disclosure, so that topic should not be introduced as an examinable relief.
Worked example: Assume RMB100,000 remains unpaid for ten chargeable days at 0.05% daily, then RMB40,000 is paid. A further five days cost RMB60,000 × 0.05% × 5. Total charges are RMB500 plus RMB150, independently of any separately established penalty.
Common mistake: Applying a daily charge to the original principal throughout ignores partial payments and can overstate the late-payment amount.
Official syllabus reference: [2]
Income tax on individuals
10. Individual residence and income-source boundaries
Individual residence determines the starting territorial scope of IIT, while income source determines which receipts fall within that scope. Residence analysis considers domicile and, where relevant, the statutory presence test. A resident's starting scope is worldwide income, subject to applicable reliefs; a non-resident's scope is China-sourced income. Employment source generally follows where duties are performed rather than simply where salary is paid. Establish residence before selecting annual resident or non-resident calculation mechanics. Treaty calculations and particular foreign-income reliefs should not be assumed without relevant facts and an examinable basis.
Worked example: Assume the question establishes that Mei is non-resident and earns RMB90,000 for duties wholly performed in China, paid into an overseas account. The overseas bank account does not change the stipulated employment source, so the receipt remains within the China-source analysis.
Common mistake: Equating overseas payment with foreign-source income overlooks where the activity generating the employment income was actually performed.
Official syllabus reference: [2]
11. Employment remuneration and benefits in kind
Employment income can include cash salary, bonuses and benefits provided because of employment. Analyse the economic benefit and its connection with the employment relationship rather than relying on the employer's account label. A cash allowance and reimbursement of genuine business expenditure can require different treatment. Personal expenses paid by an employer may constitute remuneration unless a relevant exemption applies. For a computation, include taxable benefits at the valuation required by the facts and exclude only benefits with an established exemption. Do not assume every employer reimbursement is tax-free.
Worked example: Assume an employer pays RMB12,000 of an employee's personal club fees, with no applicable exemption, and reimburses RMB3,000 of evidenced business travel. The club payment enters remuneration; the stipulated business reimbursement does not become salary merely because the employer pays it.
Common mistake: Excluding every non-cash payment from salary overlooks taxable personal benefits delivered through employer-paid goods or services.
Official syllabus reference: [2]
12. Comprehensive-income receipt conversions
Resident comprehensive income combines employment, independent services, royalties and manuscripts, but gross receipts do not necessarily enter the annual base identically. Services and royalties receive the applicable expense adjustment; manuscripts also receive their category-specific reduction. These category adjustments precede annual personal deductions and application of the progressive schedule. Classification therefore affects the base even when two activities produce equal cash receipts. The supplied syllabus excludes resident withholding calculations for services, royalties and manuscripts, but still includes their treatment in the resident's annual comprehensive-income computation.
Worked example: Using assumed factors of 80% for services and 80% × 70% for manuscripts, receipts of RMB50,000 in each category contribute RMB40,000 and RMB28,000 respectively. The combined assessable amount is RMB68,000 before annual personal deductions and progressive tax.
Common mistake: Applying one receipt percentage to every comprehensive-income category loses the distinct manuscript adjustment and can overstate taxable income.
Official syllabus reference: [2]
13. Basic, contribution and additional deductions
Comprehensive-income deductions include the basic allowance, qualifying social contributions and eligible specific additional deductions. The seven additional categories concern infants under three, children's education, continuing education, rent, mortgage interest, serious illness and elderly care. Their functions differ: some recognise family responsibilities, others specified expenditure. Separate deduction eligibility from the numerical amount supplied for a computation, and avoid duplicating incompatible or already claimed amounts. This syllabus tests recognition of the categories while excluding their detailed amounts and claiming mechanisms, so a practice calculation should supply the necessary deduction values.
Worked example: Assume adjusted comprehensive income is RMB360,000 and the question supplies allowable deductions of RMB60,000 basic, RMB24,000 contributions and RMB36,000 additional allowances. Taxable income before donations is RMB240,000. The candidate uses the supplied entitlement without inventing category-specific monthly amounts.
Common mistake: Learning unsupplied allowance amounts instead of recognising deduction categories can introduce unnecessary detail and unsupported assumptions into a computation.
Official syllabus reference: [2]
14. Cumulative salary withholding mechanics
Cumulative provisional withholding calculates tax on salary accumulated to the current payroll period after matching cumulative deductions. Apply the appropriate cumulative schedule, then subtract tax already withheld for earlier periods. This lets progressive bands respond to income earned so far rather than treating every month as an isolated annual assessment. A changing salary or bonus can therefore alter the current deduction substantially. Maintain consistent periods for income, allowances and contributions. Any negative result requires the applicable collection treatment rather than an automatic assumption that payroll immediately pays a cash refund.
Worked example: Assume cumulative tax calculated at June is RMB18,400 and January-to-May withholding totals RMB15,900. June withholding is RMB2,500. Calculating June salary alone would discard the cumulative progression and would not necessarily produce the same deduction from the employee's pay.
Common mistake: Subtracting only the previous month's withholding leaves earlier payments uncredited and overstates the current cumulative collection amount.
Official syllabus reference: [2]
15. Eligible annual bonus election
Where the applicable rules permit an eligible annual bonus to be taxed separately, compare that result with aggregation into comprehensive income. Under the separate mechanism, the monthly equivalent selects a rate and quick deduction, but the selected rate applies to the whole bonus and the quick deduction is applied as prescribed. Aggregation instead exposes the bonus to the individual's annual marginal position after deductions. Neither method is automatically preferable. Confirm eligibility and the relevant examination-period treatment, then compare complete liabilities before deducting common withholding credits.
Worked example: Assume separate taxation produces RMB9,800 bonus tax plus RMB22,000 ordinary tax, while aggregation produces RMB35,000 overall tax. Separate taxation totals RMB31,800 and saves RMB3,200. The comparison uses total liabilities rather than comparing the bonus rate with an average salary rate.
Common mistake: Multiplying the selected bonus quick deduction by twelve changes the separate-tax formula and can materially understate the liability.
Official syllabus reference: [2]
16. Non-resident comprehensive-income calculations
Non-resident IIT begins with China-sourced income and uses the category and period rules applicable to non-residents. Do not automatically import the resident annual comprehensive-income aggregation or cumulative salary method. Employment deductions, service and royalty expense adjustments, manuscript treatment and bonuses must be considered under the relevant non-resident mechanism. A monthly computation and an annual resident computation can use different schedules even for similar receipts. Establish status, source, category and assessment period in that order, then apply the supplied amounts without assuming treaty reductions or resident additional allowances.
Worked example: Assume a non-resident's monthly China salary is RMB30,000, the permitted monthly deduction is RMB5,000 and the supplied schedule gives tax of 20% less RMB1,410. Tax is RMB25,000 × 20% − RMB1,410 = RMB3,590 for that month.
Common mistake: Annualising a non-resident's monthly salary and using the resident annual table can apply the wrong assessment mechanism.
Official syllabus reference: [2]
17. Business income: actual and deemed bases
Business-operation income is computed separately from comprehensive income. On an actual basis, taxable profit starts from business receipts and deducts qualifying costs, expenses and losses under the applicable rules. Personal consumption and proprietor drawings are not transformed into deductible wages by their bookkeeping description. Where the authorised conditions for a deemed basis apply, verified revenue or another prescribed measure may replace unreliable profit records. The method must follow the established assessment basis; a taxpayer cannot simply choose whichever produces less tax. Avoid importing excluded local variations.
Worked example: Assume verified revenue is RMB800,000 and an authorised deemed profit rate is 12%. Deemed business profit is RMB96,000 before any separately permitted adjustments. An unsupported claim that actual profit was only RMB40,000 does not replace the specified deemed assessment basis.
Common mistake: Treating a proprietor's own drawings as employee remuneration reduces business profit for a distribution rather than a genuine wage cost.
Official syllabus reference: [2]
18. Partnership allocations and business-loss relief
A partnership's adjusted business result is allocated to partners under the applicable allocation rules, and the partners face individual taxation rather than the partnership being treated as an ordinary EIT-paying company. Determine the taxable partnership result before considering the partners' personal computations. Partner drawings or fixed monthly amounts do not necessarily measure their taxable profit shares. Valid business losses require tracking by origin, permissible use and expiry; they should not automatically offset salary or unrelated income. Apply the stated loss-relief ordering before or after allocation as the relevant rules require.
Worked example: Assume adjusted partnership profit is RMB500,000 and a valid RMB50,000 partnership loss is relieved before allocation. The remaining RMB450,000 is split 70:30, giving partners RMB315,000 and RMB135,000. Their cash drawings do not change those stipulated profit shares.
Common mistake: Taxing only cash withdrawn by a partner overlooks allocated business profit retained inside the partnership during the year.
Official syllabus reference: [2]
19. Rental deductions and assessment periods
Rental IIT concerns income from leasing movable or immovable property and is generally calculated within its own category rather than combined with salary. Establish the relevant rental assessment period, then apply eligible taxes, repair deductions and the appropriate fixed or percentage expense allowance in the correct sequence. Property type can affect concessions, so residential treatment should not be extended automatically to equipment or commercial premises. Repair deductions may also be constrained by the governing rules. Use the question's supplied eligibility and limits instead of treating every cash outlay as immediately deductible.
Worked example: Assume monthly equipment rent is RMB10,000, eligible preliminary deductions are RMB1,000, the expense allowance is 20% of the remainder and tax is 20%. Taxable rent is RMB7,200 and IIT is RMB1,440. Each deduction belongs to the stated rental period.
Common mistake: Applying residential-property concessions to equipment rent merely because both receipts are rental income can select an inappropriate tax treatment.
Official syllabus reference: [2]
20. Property disposal gains versus gross proceeds
Income from selling property is measured through the applicable gain computation, which distinguishes disposal proceeds from allowable original cost and transfer expenses. This differs from taxing the whole receipt and from treating a sale as recurring rental income. Establish ownership, the asset sold, consideration and evidence supporting its tax basis. Movable and immovable property may involve different supporting costs or other taxes. The supplied IIT syllabus excludes the family-residence sale exemption, so that exemption should not be introduced as a shortcut to avoid an otherwise required gain calculation.
Worked example: Assume an individual sells a qualifying asset for RMB300,000, with evidenced deductible original cost of RMB220,000 and allowable transfer expenses of RMB10,000. The taxable gain is RMB70,000. At an assumed 20% rate, IIT is RMB14,000 rather than tax on gross proceeds.
Common mistake: Deducting an estimated replacement price instead of the allowable original tax cost can distort the individual's disposal gain.
Official syllabus reference: [2]
21. Investment, occasional and exempt receipts
Interest, dividends and occasional receipts belong to categories distinct from resident comprehensive income. Their treatment depends on the precise instrument or receipt and any applicable exemption, rather than a blanket rule that every investment return is taxable or exempt. Classify the source before selecting a fixed-rate calculation. A dividend is not a capital disposal gain, and an occasional prize is not automatically business turnover. Where exemption applies, exclude the qualifying receipt rather than using it to absorb progressive bands or personal deductions intended for a different income category.
Worked example: Assume a question identifies RMB8,000 of interest as exempt and RMB12,000 of dividends as taxable at 20%, with no other adjustment. IIT is RMB2,400 on the dividend. Combining both receipts into the salary computation would ignore the supplied category treatment.
Common mistake: Treating every return paid by a financial institution as exempt ignores differences between the underlying instruments and income categories.
Official syllabus reference: [2]
22. Charitable donation ceilings and tax savings
A charitable payment reduces taxable income only when it meets the relevant qualification requirements and fits the applicable deduction rule. Establish the permitted recipient or channel, the income base used for any ceiling and whether a special full deduction is expressly available. A deduction reduces the tax base; it is not normally a currency-for-currency tax credit. Its tax saving depends on the marginal tax affected, potentially across more than one band. Do not invent carry-forward relief or move the deduction between income categories without a supporting rule.
Worked example: Assume pre-donation taxable income is RMB200,000, the donation ceiling is 30% of that amount and a qualifying donation is RMB70,000. The deduction is limited to RMB60,000. If the affected income is taxed at 20%, the assumed tax saving is RMB12,000.
Common mistake: Subtracting a donation directly from tax payable mistakes an income deduction for a tax credit and overstates relief.
Official syllabus reference: [2]
23. Sole-proprietor tax reduction on qualifying income
The supplied syllabus includes the 50% IIT reduction associated with the first RMB2 million of qualifying individual-business income. This is a reduction of attributable tax, rather than an instruction to halve all turnover, deduct another business expense or exempt every profit above the specified segment. Compute the ordinary business-income liability first, identify the tax attributable to the eligible portion under the applicable method and apply the reduction at the correct stage. Preserve the distinction between individual-business treatment and EIT incentives, particularly because small low-profit enterprise incentives are excluded here.
Worked example: Assume the entire business-income liability of RMB80,000 is expressly attributable to income qualifying for the syllabus-listed reduction. A 50% reduction saves RMB40,000, leaving RMB40,000 before payment credits. The relief does not alter the business's revenue or accounting expense records.
Common mistake: Applying the reduction to an incorporated company's EIT confuses an individual-business relief with a separate enterprise tax regime.
Official syllabus reference: [2]
Income tax on enterprises
24. Enterprise residence and effective management
Enterprise residence is determined using the relevant registration and effective-management tests, not simply the nationality of shareholders or the location of customers. A resident enterprise's starting EIT scope includes domestic and overseas income. A non-resident enterprise is analysed through its China establishment or other China-source income rules. Effective management concerns substantive control and management rather than a mailing address alone. Establish the entity's residence before determining the taxable income perimeter, then consider source and attribution. Residence is distinct from whether a particular receipt qualifies for exemption.
Worked example: Assume an overseas-incorporated enterprise is expressly established to have its effective management in China under the applicable test. Its foreign registration alone does not establish non-residence. The computation starts with resident scope and then considers the treatment of each domestic and overseas receipt.
Common mistake: Using incorporation overseas as conclusive proof of non-residence overlooks the separate effective-management route to enterprise residence.
Official syllabus reference: [2]
25. Non-resident establishments and source-based taxation
For a non-resident enterprise, distinguish income attributable to a China establishment from other China-sourced income subject to the applicable source-based treatment. A branch earning trading profits is not analysed identically to a foreign company receiving a passive royalty without a relevant establishment connection. Source rules vary by income type, so payer location alone is not a complete test. Identify the business presence, income character and connection to that presence before selecting the tax base. Treaty incentives and certain non-resident withholding-agent obligations are excluded from the supplied scope.
Worked example: Assume a foreign company has a China branch with RMB300,000 taxable trading profit and separately receives a royalty expressly identified as outside that branch's business. The branch-profit computation and the royalty's source-based computation must be analysed separately before applying their supplied rates.
Common mistake: Applying a passive-income gross-receipt calculation to every foreign enterprise ignores business establishments and income attributable to their operations.
Official syllabus reference: [2]
26. Revenue recognition and deemed enterprise sales
EIT revenue recognition follows the applicable tax rules for the transaction, which may differ from the timing of cash collection or the accounting entry. Examine when the relevant sale, service or contractual performance condition is satisfied. Deemed-sale rules can also recognise income when assets leave the enterprise for specified non-sale purposes. A transfer between internal locations is not automatically equivalent to a transfer to an external beneficiary. Where a deemed sale applies, consider both the required revenue measure and any corresponding deductible tax cost to avoid taxing gross value as profit.
Worked example: Assume goods with tax cost RMB60,000 are transferred externally in circumstances treated as a deemed sale at RMB90,000. Recognising RMB90,000 revenue and RMB60,000 corresponding cost produces RMB30,000 trading profit before any separate limitation on the underlying donation or distribution.
Common mistake: Recognising deemed-sale revenue without considering the corresponding tax cost can overstate profit from the transferred inventory.
Official syllabus reference: [2]
27. Permanent and timing differences in EIT
A reconciliation starts with accounting profit and adjusts differences between book treatment and tax treatment. Permanent differences, such as an expressly exempt receipt or non-deductible fine, do not reverse through a later ordinary deduction. Timing differences move recognition between periods, as with different depreciation allowances or expenditure recognised at a different permitted stage. Add back book expenses before deducting replacement tax allowances where necessary. Pre-commencement expenditure likewise needs its permitted recognition treatment rather than automatic deduction merely because cash was paid. Keep tax-base adjustments separate from credits against liability.
Worked example: Accounting profit is RMB500,000 after a RMB20,000 non-deductible fine and RMB80,000 book depreciation. Assume tax depreciation is RMB100,000. Adding the fine and replacing depreciation produces RMB500,000 taxable income: RMB500,000 + RMB20,000 + RMB80,000 − RMB100,000.
Common mistake: Subtracting the full tax depreciation without reversing book depreciation claims two deductions for the same asset in the reconciliation.
Official syllabus reference: [2]
28. Deductibility tests and expense ceilings
An accounting expense is not automatically an EIT deduction. Test its connection with income production, substantiation, tax character and any specific restriction. Some expenses are prohibited, some are deductible subject to a ceiling and others are deductible in a different period. Where a ceiling uses revenue or accounting profit, use that defined denominator rather than substituting taxable income. A limited expense may create an add-back and, only if permitted, a separate carry-forward balance. Distinguish those schedules from ordinary trading losses and from unsupported provisions that lack a current deduction.
Worked example: Assume a particular expense is deductible up to 5% of qualifying revenue. Revenue is RMB2,000,000 and the recorded expense is RMB130,000. The ceiling is RMB100,000, requiring a RMB30,000 add-back. Any carry-forward depends on an additional rule rather than arising automatically.
Common mistake: Using taxable profit as every expense ceiling's denominator ignores rules that expressly measure entitlement against revenue or accounting profit.
Official syllabus reference: [2]
29. Public-welfare donations and vintage tracking
Enterprise donation relief depends on qualification, the applicable accounting-profit ceiling and any permitted carry-forward period. A current donation already expensed in the accounts must be reconciled with the total tax deduction allowed, including eligible earlier-year donations. Track each donation's year of origin, amount used and remaining life. Apply the required priority between older and current donations where relevant. A full-deduction exception requires an established basis; charitable purpose alone does not prove it. Donation carry-forwards are deduction entitlements and should be scheduled separately from tax losses and tax credits.
Worked example: Assume a RMB120,000 donation ceiling, RMB30,000 eligible older donations used first and RMB150,000 current donations. Current deduction is RMB90,000, leaving RMB60,000 current donations unused. Total relief is RMB120,000, even though only RMB90,000 relates to the expense recorded this year.
Common mistake: Comparing only current donations with the ceiling can overlook older deductions and misstate both taxable income and remaining relief.
Official syllabus reference: [2]
30. Tangible asset basis and straight-line depreciation
Tax depreciation allocates the depreciable basis of qualifying tangible assets over their permitted useful lives. Establish original tax value, capitalised acquisition costs, residual value and commencement date before calculating the allowance. Straight-line depreciation divides depreciable basis by the applicable life, then apportions for the permitted months. Land interests, assets not qualifying for depreciation and fully deducted assets require separate analysis. Book depreciation is evidence of accounting treatment, not the tax allowance itself. Disposal also requires the remaining tax basis rather than simply the accounting carrying amount.
Worked example: Assume a machine's tax cost is RMB520,000, residual value is RMB20,000 and the permitted life is five years. Annual straight-line depreciation is RMB100,000. If six months qualify in the acquisition year, the deduction is RMB50,000 before considering any separate accelerated allowance.
Common mistake: Depreciating the residual value along with the recoverable cost overstates deductions when the tax computation requires a residual amount.
Official syllabus reference: [2]
31. Intangible amortisation and asset-loss recognition
Capitalised intangible assets generally recover eligible tax cost through the applicable amortisation mechanism rather than an immediate revenue expense. Establish whether expenditure creates an asset, its tax basis and the permitted recovery period; productive biological assets also require their specified recovery rules. A later asset loss is a separate recognition question requiring the conditions and evidence for deductibility. An accounting impairment does not necessarily establish a current tax loss. Avoid deducting both full original expenditure and amortisation, and remove previously recovered cost when calculating any remaining deductible basis.
Worked example: Assume an acquired licence has tax cost RMB300,000 and a permitted ten-year straight-line recovery period. Annual amortisation is RMB30,000. After four full years, the remaining tax basis is RMB180,000; an accounting write-down alone does not prove that amount is immediately deductible.
Common mistake: Treating an accounting impairment as automatically tax-deductible bypasses the separate rules governing recognised asset losses and supporting evidence.
Official syllabus reference: [2]
32. Loss carry-forwards and expiry sequencing
An EIT loss is determined after tax adjustments, so it can differ from an accounting loss. Carry-forward relief reduces later eligible taxable profits within the relevant permitted period. Maintain a year-by-year schedule showing original loss, utilisation and expiry, and use the applicable ordering to avoid wasting earlier-expiring relief. Do not assume a loss produces an immediate refund or can be transferred to an unrelated entity. Special loss rules for restructurings, consolidated head-office returns and specified COVID-era extensions are excluded from the supplied syllabus and should not be introduced into ordinary examples.
Worked example: Assume valid losses of RMB80,000 and RMB50,000 remain, with the first expiring earlier. Current adjusted profit is RMB100,000. Using RMB80,000 first and RMB20,000 second leaves no taxable profit and RMB30,000 of the later loss available within its remaining permitted life.
Common mistake: Relieving newer losses first without checking expiry can leave an older deductible balance unused when its permitted life ends.
Official syllabus reference: [2]
33. Foreign tax credits and gross foreign income
A resident enterprise's foreign tax credit relieves double taxation within the applicable limit. Include the relevant foreign income on the correct gross basis, compute PRC tax and identify the ceiling attributable to that foreign income under the prescribed method. Current credit cannot simply equal every foreign payment regardless of that ceiling. Excess eligible foreign tax requires separate consideration under any permitted carry-forward rules. Avoid deducting foreign tax from income and also crediting it unless a specific rule authorises that treatment. Treaty incentives for non-resident enterprises are a different, excluded issue.
Worked example: Assume foreign gross income is RMB400,000, foreign income tax is RMB120,000 and the applicable PRC ceiling is 25% of that income. Current credit is limited to RMB100,000. The remaining RMB20,000 requires separate carry-forward analysis rather than an unrestricted current credit.
Common mistake: Using foreign income net of overseas tax and also claiming a credit can give double relief for the same payment.
Official syllabus reference: [2]
34. Reduced rates versus project-income exemptions
Enterprise incentives can operate through reduced rates, exempt income or time-limited relief for qualifying projects. These mechanisms should not be interchanged. A preferential enterprise rate may apply to an eligible tax base, while a project exemption requires identifying and allocating the qualifying project's income and expenses. The supplied scope includes specified agricultural, infrastructure, environmental, technology, software, integrated-circuit, resource-utilisation and regional incentives, while excluding detailed eligibility criteria and small low-profit enterprise incentives. Where eligibility is established in a problem, apply the specified mechanism and separate non-qualifying income where required.
Worked example: Assume a qualifying project earns RMB200,000 exempt profit and a separate ordinary activity earns RMB300,000 taxable profit. At an assumed 25% rate, tax is RMB75,000. Applying a guessed reduced rate to the whole RMB500,000 would substitute a different incentive mechanism.
Common mistake: Treating every incentive as a reduced rate ignores exemptions and project-specific relief that change the taxable base instead.
Official syllabus reference: [2]
35. R&D and qualifying salary super-deductions
A super-deduction grants an additional deduction beyond the ordinary deduction for eligible expenditure. First determine which costs qualify and whether they have already reduced accounting profit. For expensed qualifying R&D, the reconciliation generally adds only the permitted extra amount; it does not deduct the ordinary expense again. Capitalised development expenditure requires the applicable enhanced recovery treatment rather than an immediate duplicate expense. Qualifying salary-related enhancements similarly depend on their stated eligible base. Separate eligibility from arithmetic, and do not extend a supplied enhancement to all payroll or all research-labelled expenditure.
Worked example: Assume RMB240,000 of qualifying R&D has already been expensed and the permitted additional deduction is 100%. The reconciliation deducts another RMB240,000, producing total tax deductions of RMB480,000 for that expenditure. Deducting RMB480,000 again would wrongly triple the ordinary cost recovery.
Common mistake: Subtracting ordinary cost plus the enhancement again from accounting profit duplicates the expense already recorded in the accounts.
Official syllabus reference: [2]
36. Equipment tax credits and accelerated cost recovery
Equipment incentives may reduce the tax liability through a credit or accelerate deductions from taxable income. A credit for eligible environmental, energy-saving or water-saving equipment is therefore conceptually different from accelerated depreciation. Establish the qualifying expenditure base and whether amounts are already recovered through ordinary allowances. Accelerated recovery changes deduction timing; it does not necessarily increase lifetime cost recovery. A tax credit is applied after calculating tax and may have its own limit and carry-forward rules. Do not deduct a credit directly from accounting profit or assume every equipment purchase qualifies.
Worked example: Assume eligible equipment cost is RMB500,000 and a credit of 10% is expressly available. The credit is RMB50,000 against calculated tax, subject to the stated utilisation rules. An additional depreciation deduction of RMB50,000 would save only RMB12,500 at an assumed 25% rate.
Common mistake: Equating a deduction with an equally sized credit ignores that a deduction saves tax only at the applicable tax rate.
Official syllabus reference: [2]
37. Arm's-length pricing and comparable transactions
The arm's-length principle asks whether associated parties' conditions resemble those independent parties would agree in comparable circumstances. Analyse product, functions, assets, risks and contractual terms before adopting a comparison. A comparable uncontrolled price can test a closely matched transaction; resale-price, cost-plus or profit-based approaches may fit different available evidence. Adjust material comparability differences rather than treating every external price as interchangeable. Once an appropriate arm's-length amount is established, calculate its effect on revenue or deductible cost. Detailed advance pricing procedures and BEPS material are excluded from this syllabus.
Worked example: Assume comparable independent sales establish RMB120 per unit after all necessary adjustments. A company sells 10,000 units to an associate at RMB100. The arm's-length revenue adjustment is RMB200,000, increasing taxable profit by that amount if no corresponding cost adjustment is needed.
Common mistake: Selecting the highest available external price without examining comparability can create an unsupported transfer-pricing adjustment rather than an arm's-length result.
Official syllabus reference: [2]
38. Commercial purpose and special tax adjustments
General anti-avoidance analysis considers arrangements whose tax benefits arise without the required commercial substance or purpose under the applicable rules. A low-tax outcome alone does not prove abuse; examine what the arrangement does economically and how the tax benefit arises. Special adjustments can alter the taxable amount and carry consequences for interest and the adjustment period. Keep those consequences separate from ordinary penalties and ordinary late-payment calculations. The syllabus includes the principle and consequences but excludes detailed GAAR procedures, beneficial-owner definitions, reporting obligations and restrictions on loan-interest deductibility.
Worked example: Assume a fact pattern establishes that an inserted entity performs no substantive function and that the arrangement meets the applicable anti-avoidance conditions. Recharacterisation removes RMB300,000 of deductions. At an assumed 25% rate, additional principal tax is RMB75,000 before separately calculated adjustment interest.
Common mistake: Assuming every tax-efficient commercial transaction is avoidance overlooks the need to establish the applicable anti-avoidance conditions and economic facts.
Official syllabus reference: [2]
Land appreciation tax
39. LAT scope: transfers, consideration and exclusions
LAT concerns appreciation arising from transfers of relevant land-use rights, buildings and attached facilities within its statutory scope. Determine whether there is a qualifying transfer and consideration before calculating a gain. A lease, an ownership transfer and a transaction with a specific exemption are not interchangeable. Identify the transferor and property interest rather than treating every property-related cash receipt as subject to LAT. The supplied scope includes specified relief for an individual's own dwelling and temporary exemptions, but their conditions must be distinguished from the separate IIT treatment of a residence disposal.
Worked example: An individual grants a tenant a lease while retaining ownership of the building. The rent is not automatically LAT disposal proceeds. If the same owner later transfers the property interest for consideration, LAT scope and any applicable dwelling exemption require a separate analysis.
Common mistake: Assuming a property transaction exempt from one tax must be exempt from LAT ignores separate taxable events and relief conditions.
Official syllabus reference: [2]
40. LAT consideration and VAT-exclusive revenue
LAT proceeds must be measured under the applicable transaction-price rules, including the treatment of VAT and non-cash consideration. Where a quoted selling price includes VAT, extract VAT using the stated method before calculating appreciation. Do not remove VAT again from a figure already described as VAT-exclusive. Consideration can include more than immediate cash, so identify the full value transferred under the relevant rules. Once revenue is measured, deduct only LAT-allowable items; accounting sales profit and the cash received after settling a mortgage are not substitutes for the LAT base.
Worked example: Assume consideration is RMB10,900,000 including VAT at 9%, with the ordinary extraction method expressly required. VAT-exclusive proceeds are RMB10,000,000. If allowable LAT deductions are RMB8,000,000, appreciation is RMB2,000,000 before applying the relevant LAT band or exemption.
Common mistake: Subtracting a seller's outstanding mortgage from LAT proceeds confuses financing settlement with the statutory measurement of property-transfer consideration.
Official syllabus reference: [2]
41. Developer additional deduction and its cost base
A real estate developer may receive an additional LAT deduction calculated on specified land-acquisition and development-cost components. This is separate from ordinary deductions for those same qualifying costs. Identify the statutory base precisely: a percentage allowance should not automatically apply to financing expenses, selling expenses or transfer taxes simply because they relate to the project. Allocate shared costs rationally to the property sold before calculating the additional amount. The extra deduction reduces appreciation and also increases the denominator used to select the LAT appreciation band, so an error can affect two stages.
Worked example: Assume qualifying land and construction costs are RMB3,000,000 and RMB4,000,000, with an additional deduction of 20% of their sum. The extra deduction is RMB1,400,000. A separately allowable RMB500,000 development-expense deduction does not enter that assumed additional-deduction base.
Common mistake: Applying the developer percentage to every deductible project expense overstates the additional allowance when its base is restricted.
Official syllabus reference: [2]
42. Development expenses and interest double counting
LAT distinguishes development costs from development expenses such as financing-related allowances. The allowable treatment of interest can depend on evidence, attribution and the prescribed deduction method. Establish whether a supplied percentage allowance includes interest or whether eligible interest is separately deductible under the stated method. Never combine mutually exclusive methods or deduct interest twice. Distinguish the development-expense base from the developer's additional-deduction base. Accounting capitalisation does not itself resolve tax classification; follow the applicable LAT categories and allocate shared project amounts consistently to the property transferred.
Worked example: Assume allowable development expenses are fixed at RMB600,000 and expressly include RMB180,000 interest. Total deduction for that category remains RMB600,000, not RMB780,000. The recorded interest helps explain the allowance but does not create another deduction under the stipulated inclusive method.
Common mistake: Adding actual interest to an allowance that already includes financing expenses counts the same cost twice in LAT deductions.
Official syllabus reference: [2]
43. Used buildings and condition-adjusted appraisal
A used-building LAT computation can require an approved valuation approach rather than the developer's newly constructed property cost schedule. Under a condition-adjusted replacement approach, replacement construction value is reduced by the assessed condition or newness factor. Establish separately whether land-acquisition amounts and transfer taxes are allowable so that the valuation does not omit or duplicate components. Historical book value is not automatically the required building deduction. Where an alternative documented method applies, use the method established by the facts rather than freely choosing whichever produces the smallest appreciation.
Worked example: Assume approved replacement construction value is RMB8,000,000 and the accepted condition factor is 65%. The building deduction is RMB5,200,000. If the question separately permits RMB300,000 transfer taxes, total stated deductions become RMB5,500,000 before considering any independently eligible land amount.
Common mistake: Using the full replacement value without the condition adjustment overstates the deductible value of a used building under this method.
Official syllabus reference: [2]
44. Appreciation bands and ordinary-residence exemption
LAT progression is selected using appreciation divided by allowable deductions, not appreciation divided by proceeds. Apply the appropriate marginal-band calculation or its equivalent quick-deduction formula. A quick deduction generally relates to the specified deduction base, so identify that base carefully. Qualifying ordinary standard residences can have an exemption linked to an appreciation ceiling, but eligibility and the ceiling test must both be satisfied. Such an exemption boundary is not necessarily a tax-free slice once exceeded. Separate qualifying and non-qualifying projects where required rather than blending their appreciation indiscriminately.
Worked example: Assume proceeds are RMB12,000,000 and deductions RMB8,000,000. Appreciation is RMB4,000,000, and the ratio is 50%, not 33.33%. Under an expressly supplied first-band rate of 30% with no exemption, LAT is RMB1,200,000. Any residential exemption would require additional qualifying facts.
Common mistake: Measuring appreciation against selling proceeds understates the ratio and can select the wrong LAT band or exemption result.
Official syllabus reference: [2]
Indirect taxes – value added tax, consumption tax and customs duty
45. VAT taxpayer status and calculation methods
VAT scope identifies taxable supplies and the person responsible, while taxpayer status determines the available calculation method. Under the general method, output VAT is offset by eligible input VAT. A simplified method instead applies the relevant collection rate to its defined base without ordinary input-credit recovery. Small-scale exemption is a separate eligibility question, not a general licence to ignore taxable sales. Establish status, supply type and any applicable exemption before calculating. This guide follows the syllabus's express exclusion of changes under the VAT Law effective from January 2026.
Worked example: Assume a general taxpayer has RMB80,000 output VAT and RMB50,000 eligible input VAT, giving RMB30,000 payable. A different business expressly subject to a simplified 3% collection on RMB1,000,000 tax-exclusive sales also pays RMB30,000, but reaches that result through a different mechanism.
Common mistake: Deducting ordinary input VAT under a simplified calculation imports a feature of the general method into a different regime.
Official syllabus reference: [2]
46. VAT-inclusive prices and rate-specific outputs
Output VAT is calculated on the relevant VAT-exclusive sales amount. If a price includes VAT, divide by one plus the applicable rate before calculating tax; multiplying the inclusive amount directly by the rate overstates output. Identify the supply category before choosing a rate, and keep differently rated supplies separately recorded where required. Discounts, additional charges and adjustments must be treated according to their tax character rather than their invoice label alone. A zero rate, reduced positive rate and exemption have different consequences and should not be used as interchangeable descriptions.
Worked example: Assume a taxable sale carries 13% VAT and the customer pays RMB226,000 including VAT. Tax-exclusive sales are RMB200,000 and output VAT is RMB26,000. Applying 13% directly to the customer's payment would incorrectly calculate RMB29,380 of output tax.
Common mistake: Multiplying a VAT-inclusive receipt directly by the stated rate calculates tax on an amount that already contains VAT.
Official syllabus reference: [2]
47. Input VAT eligibility, attribution and transfer-out
Input VAT recovery requires both appropriate evidence and an eligible use of the purchase. Attribute input to taxable, exempt, private or otherwise restricted activities before claiming credit. Shared input may require an allocation method, while a later disqualifying event can require transfer-out of a previously claimed credit. Current non-creditable input and reversal of an earlier credit are different entries even if both increase current tax. Do not assume every business expense generates recoverable VAT, or that a valid invoice overrides a use-based restriction. Track the tax amount separately from the purchase's net cost.
Worked example: Assume input VAT invoices total RMB70,000, including RMB8,000 solely for an exempt activity. Current eligible credit is RMB62,000. If another RMB3,000 previously credited must be reversed, the current VAT reconciliation deducts RMB62,000 and adds the RMB3,000 transfer-out.
Common mistake: Excluding a restricted purchase's net cost instead of its input VAT confuses the expense amount with the credit being tested.
Official syllabus reference: [2]
48. Deemed sales, mixed sales and composite supplies
VAT classification considers the substance and structure of a transaction. Deemed-sale rules can create output tax despite no ordinary cash sale, such as a qualifying external transfer of goods. Mixed-sale analysis concerns a transaction combining elements that must be characterised together under the applicable rules. Composite or concurrently supplied activities may instead require separate accounting and rates where prescribed. Determine what is supplied, whether the elements form one transaction and which classification rule applies. Do not select the lowest rate merely because an invoice separately describes part of an integrated supply.
Worked example: Assume inventory donated externally is a deemed sale valued at its normal VAT-exclusive price of RMB40,000, with a supplied 13% rate. Output VAT is RMB5,200 even though no customer pays cash. The absence of a sales receipt does not remove the stipulated deemed-sale event.
Common mistake: Treating every separately printed invoice line as a separate supply can bypass the applicable mixed-transaction classification rule.
Official syllabus reference: [2]
49. Export zero-rating, exemption and refund boundaries
Zero-rating and exemption can both remove output VAT, but their input-credit consequences differ. A qualifying zero-rated transaction may preserve credit or access an export mechanism, whereas exempt supplies generally restrict attributable input recovery under the applicable rules. Export relief is not simply a refund of every input invoice: method, eligible base, prescribed refund rate and limits matter. Distinguish a current offset, a carried credit and a cash refund. The supplied syllabus excludes special-industry input refunds and additional credits, so these should not be imported into ordinary export computations.
Worked example: Assume export input VAT of RMB18,000 remains creditable under a supplied zero-rating rule. If domestic output is RMB12,000, a simplified no-refund exercise leaves RMB6,000 carried forward. Treating those exports as exempt would instead deny the attributable credit under the stated comparison rules.
Common mistake: Calling every excess export-related credit an immediate cash refund overlooks the separate conditions and limits governing refund entitlement.
Official syllabus reference: [2]
50. VAT liability timing and invoice controls
VAT administration requires the correct period of recognition as well as the correct amount. Determine the liability date from the applicable transaction rule, considering invoicing, payment, delivery or other specified events without assuming they always coincide. Match input-credit evidence and eligibility to the permitted claim period. A later accounting entry does not automatically defer an earlier VAT event. Reconcile issued invoices, sales records, adjustments and filed returns, and distinguish an invoice correction from cancellation of the underlying supply. Prepaid-card timing and excluded special-industry methods should remain outside the stated scope.
Worked example: Assume a question expressly makes issuing an invoice the VAT trigger. An invoice issued on 28 June for goods delivered on 3 July belongs to June for output-tax purposes under that assumption. Recording accounting revenue in July does not change the supplied VAT trigger.
Common mistake: Using the financial-statement revenue month for every VAT transaction overlooks tax-specific liability dates and can shift tax into the wrong return.
Official syllabus reference: [2]
51. Consumption tax goods and taxable stages
CT applies to designated goods and specified taxable stages rather than every supply subject to VAT. Identify the product category and whether the event is production, importation, commissioned processing or another expressly taxable stage. Some goods can have a later-stage charge, so neither 'only manufacturers' nor 'every resale' is a reliable universal rule. Own-use transfers require their applicable treatment, which can differ according to the purpose of use. VAT and CT may coexist on the same goods, but their bases, collection mechanisms and timing must be analysed separately.
Worked example: Assume a designated product is subject to CT on domestic manufacture and importation, with no additional resale-stage charge in the scenario. A wholesaler buying duty-paid stock does not acquire another CT liability merely because its onward sale remains subject to VAT.
Common mistake: Applying CT to every VAT-taxable good overlooks that CT is limited to designated categories and specified taxable stages.
Official syllabus reference: [2]
52. Ad valorem, specific and composite CT
CT can be calculated as a percentage of a value base, a fixed amount per physical unit or a combination of both. Establish the category's required method and keep quantity units consistent. Where a deemed or import value includes ad valorem CT, solve the inclusive base by grossing up rather than applying the rate directly to pre-tax cost. Composite calculations may place a specific-tax component within the prescribed gross-up. VAT must be removed from a VAT-inclusive selling price before applying a CT base that excludes VAT under the relevant rule.
Worked example: Assume CT consists of RMB2 per unit plus 10% of VAT-exclusive selling value. For 1,000 units sold for RMB50,000 excluding VAT, specific CT is RMB2,000 and ad valorem CT is RMB5,000, giving RMB7,000 total under the supplied composite formula.
Common mistake: Calculating only the percentage component understates CT where the product is expressly subject to both value-based and quantity-based charges.
Official syllabus reference: [2]
53. Commissioned processing and CT deduction tracing
Commissioned processing requires identifying the party supplying materials, the processor's role and the applicable CT collection mechanism. It should not automatically be treated as an ordinary purchase of finished goods. Where previously taxed inputs qualify for a CT deduction in further production, relief depends on the specified product relationship and usage rules. Track opening taxed inventory, purchases and closing inventory to establish consumption when the method requires it. A CT deduction is not a VAT input credit and is not universally available for every taxed material or every subsequent resale.
Worked example: Assume eligible taxed material carries CT of RMB12,000 in opening inventory, RMB30,000 in purchases and RMB9,000 in closing inventory. Under a supplied usage-based deduction rule, deductible CT is RMB33,000. Deducting all purchases would ignore the taxed material retained at year-end.
Common mistake: Claiming CT relief for every purchase of taxed goods ignores the required eligibility relationship and the amount actually used.
Official syllabus reference: [2]
54. Customs transaction value and border-cost adjustments
Customs valuation begins with the accepted transaction-value approach where applicable, then adjusts for required additions and permitted exclusions. Relevant items can include freight and insurance to the import boundary and qualifying royalties or other payments linked to the goods. Separately identified post-import costs require their own treatment rather than automatic inclusion. The commercial invoice is therefore a starting document, not necessarily the final customs value. Check whether a cost is already included before adding it, and use the applicable currency-conversion basis when foreign-currency figures are supplied.
Worked example: Assume goods cost RMB300,000 excluding RMB20,000 border freight and RMB1,000 border insurance, all includible. Separately identified domestic transport of RMB4,000 is excluded under the stated rule. Customs value is RMB321,000, not the supplier invoice alone or the total logistics cash paid.
Common mistake: Adding freight a second time when the invoice already includes it overstates customs value and all taxes dependent on that value.
Official syllabus reference: [2]
55. The import duty, CT and VAT calculation cascade
Import taxes form a dependency chain. Compute customs duty from customs value using the applicable tariff method. If CT applies, determine its prescribed base, which can include duty and require a CT gross-up. Import VAT then generally uses the relevant value inclusive of duty and CT under the applicable calculation. Calculating all three independently on the invoice ignores these dependencies. Keep border taxes distinct from any later domestic VAT output and input-credit treatment. A recoverable import VAT payment can still be a cash amount payable at importation.
Worked example: Assume customs value is RMB100,000, duty is 10%, no CT applies and import VAT is 13% of value plus duty. Duty is RMB10,000 and VAT is RMB14,300. Total border taxes are RMB24,300 even if the importer later qualifies to credit the VAT.
Common mistake: Excluding customs duty from the stated import VAT base understates VAT even when the customs duty calculation itself is correct.
Official syllabus reference: [2]
56. Customs special zones and release obligations
Customs special zones can change when goods cross the relevant customs boundary and when duties become payable. Distinguish overseas entry into a zone, movement within it and release into the domestic market under the applicable regime. Bonded treatment is not necessarily permanent exemption: domestic release can trigger valuation, declaration and payment obligations. Customs administration also requires observing the payment deadline in the notice and calculating any prescribed late charge separately. The supplied syllabus excludes detailed processing trade, temporary imports, personal imports and e-commerce import rules, so ordinary zone principles should not expand into those exclusions.
Worked example: Assume overseas goods enter a bonded zone with duty suspended and are later released for domestic consumption. The release requires the stipulated customs declaration and duty payment. The earlier suspension explains timing; it does not by itself establish a permanent exemption from import duty.
Common mistake: Describing every free-zone movement as permanently duty-free overlooks the distinction between bonded suspension and subsequent domestic release.
Official syllabus reference: [2]
Employability and technology skills
57. Extracting digital exhibits into structured tax inputs
Digital tax work begins by separating raw facts from calculated outputs and classifying each fact by tax, period, unit and treatment. An exhibit may mix annual and monthly amounts, VAT-inclusive and exclusive prices, or expenses already deducted with additional tax allowances. Build a compact input structure that preserves those distinctions before calculating. Trace each input to its source label so that revised facts can be incorporated without reinterpreting the whole answer. This is substantive information handling: the classification determines the calculation rather than merely improving the document's appearance.
Worked example: An exhibit reports RMB113,000 VAT-inclusive receipts and RMB20,000 eligible input VAT. With an assumed 13% rate, record receipts, rate and input credit separately, then derive RMB100,000 net sales and RMB13,000 output. Keeping raw inputs prevents accidental reuse of the inclusive amount as net revenue.
Common mistake: Copying every exhibit figure into one undifferentiated list loses tax status and period labels needed to calculate reliably.
Official syllabus reference: [2]
58. Cell-reference formulas and adjustment-sign controls
A tax spreadsheet should express the relationship between inputs rather than hide important amounts inside hard-coded formulas. Use cell references for rates, allowances and credits, with labels showing whether each item changes income or tax. Sign logic follows the starting point: exempt income included in profit is subtracted, while a non-deductible expense already deducted is added back. Parentheses should preserve the sequence of base adjustments, rate application and payment credits. A formula that calculates successfully is not necessarily correct; reconcile its intermediate results to the tax mechanism.
Worked example: Suppose B2 contains profit, B3 exempt income, B4 a disallowed expense, B5 the rate and B6 advance tax. The payment formula =(B2-B3+B4)*B5-B6 preserves the distinction between profit adjustments and payment credits. Changing B3 then updates the result without editing the formula.
Common mistake: Embedding a payment credit inside the taxable-income brackets reduces its benefit to a deduction instead of a full tax credit.
Official syllabus reference: [2]
59. Response navigation and requirement-to-working links
A computer-based response can contain multiple requirements, exhibits and editable working areas. Maintain a clear mapping between each requirement and its supporting computation so that revisions affect the intended answer. Distinguish changing an input from overwriting a calculated result, and preserve explanatory text when amending a figure. Before moving between response areas, identify which period, taxpayer and tax the working concerns. This controls substantive errors such as applying a company's loss to an individual's computation or copying a final liability into a field asking for the remaining payment.
Worked example: A question asks for annual EIT and the balance after provisional payments. Keep separate labelled outputs of RMB240,000 liability and RMB35,000 payable. When revising a deduction, update both through the working rather than replacing the liability label with the payment balance.
Common mistake: Copying a correct number into the wrong requirement can still answer a different question because liability and payment balance are distinct.
Official syllabus reference: [2]
60. Tax schedules, precision and professional conclusions
Present a tax computation as a readable chain from starting amount through adjustments, taxable base, rate, liability and payment balance. State units and distinguish currency amounts from percentages. Retain enough precision in intermediate ratios to select the correct band, rounding only as required for the output. A short conclusion should answer the requested decision and quantify its consequence rather than repeat the whole schedule. Where a result depends on an expressly supplied assumption, identify that assumption without burying the calculation in unrelated qualifications. Clear presentation makes the technical reasoning assessable.
Worked example: An LAT schedule gives appreciation of RMB2,350,000 and deductions of RMB7,800,000. Show the ratio as approximately 30.13%, then apply the supplied band without prematurely rounding it to a boundary. State the final tax in RMB, followed by a sentence identifying the selected band.
Common mistake: Rounding an appreciation ratio before selecting its band can change the tax treatment even when the final currency rounding seems minor.
Official syllabus reference: [2]
Official syllabus sources
- ACCA Qualification structure and requirements | ACCA Global
- Taxation (CHN) - syllabus and study guide June 2026 to June 2027 (PDF, 777KB)