According to the latest management measure issued by Chinese government, which involves charter operators, shipowners, brokers and agency companies, the non-resident enterprises engaged in international shipping business will be requested to pay income tax which shall not exceed 25% of the net income.

A lawyer of Wang Jing & Co in Guangzhou explains that, in accordance with the relevant provisions, most of the foreign shipowners are only requested to pay 10% of the net rental income as income tax; however, as for those who have set representative offices in China,they must implement the full standard rate of 25%.

If a shipowner fails to accurately calculate and truthfully declare the amount of taxable income, the tax will be approved by the following formula: the taxable income amount = total revenue by assessed profit rate. Thereinto, ssessed profit rate is determined by the relevant institutions, and shall not be less than 15%.

The new rules have been formally went into effect on August 1, only 1 months after the release of time. And because of this, many foreign shipowners in China may still be in the dark, completely knowing nothing about the relevant tax obligations they should bear.

The new rules not only have brought some uncertainty to the shipping industry, it will also increase the transaction costs for those related ship companies.