Essential Guide for Yiwu Business Owners: Tax Obligations on Renting Out Shops and Factories

Having a shop near the International Trade City or a small factory in Chengxi or Beixiazhu, and renting it out for 10,000 CNY per month—many Yiwu business owners consider this as 'passive income.' However, when it comes to tax declaration, they find that the money is subject to multiple taxes. Below, we break down each tax according to the current regulations, with traceable sources.

I. Property Tax: 12% on Rental Income, 1.2% on Residual Value for Self-Use

This is the most easily overlooked tax. The Provisional Regulations of the People's Republic of China on Property Tax (中华人民共和国房产税暂行条例) clearly states in Article 3 that property tax is calculated based on the residual value after deducting 10% to 30% from the original value of the property; for rented properties, the rental income is the basis for calculating property tax. Article 4 provides two tax rates: 1.2% for the residual value, and 12% for rental income.

In other words, the same shop has two different tax calculation methods depending on its use:

• For self-operation: Based on the residual value × 1.2%. For example, if the original value of a factory is 2 million CNY, and the provincial deduction rate is 30%, the residual value is 1.4 million CNY, resulting in an annual property tax of 16,800 CNY (the specific deduction rate is determined by Zhejiang Province).
• Rented to others: Based on rental income × 12%. With an annual rent of 120,000 CNY, the property tax would be 14,400 CNY, nearly double the previous method.

There is also a common misunderstanding: Article 5 of the regulations exempts non-commercial properties owned by individuals from property tax. Residential homes are indeed exempt, but once the property is rented out or used for business, it is considered commercial, and this tax cannot be avoided. Article 7 of the regulations also stipulates that property tax is collected annually and paid in installments, with the specific payment period determined by the provincial government, not just 'paid at the end of the year.'

II. VAT: First Check the Threshold, Then the Collection Rate

Renting out real estate is a VAT taxable activity. According to the Announcement of the Ministry of Finance and the State Administration of Taxation on the Connection of VAT Preferential Policies After the Implementation of the VAT Law (财政部 税务总局公告2026年第10号), from January 1, 2026, to December 31, 2027, the monthly threshold for small-scale taxpayers is 100,000 CNY, 300,000 CNY for quarterly, and 1,000 CNY per transaction (day).

Natural persons are considered small-scale taxpayers. Therefore, a shop with a monthly rent of 10,000 CNY falls within the threshold and does not need to pay this tax; however, if the combined monthly rent of several shops exceeds 100,000 CNY, or if several years' rent is collected at once, it must be calculated according to the rules for real estate operating leases. According to the Interim Measures for the Administration of VAT Collection on Real Estate Operating Leases Provided by Taxpayers (国家税务总局公告2016年第16号), other individuals renting out non-residential properties are taxed at a 5% collection rate and must declare to the local tax authority where the property is located; for residential properties, the rate is reduced to 1.5%.

A practical reminder: other individuals renting out real estate can apply to the local tax authority for a proxy invoice; however, if you rent to other individuals, you cannot issue or have a proxy issue a VAT special invoice. If the tenant is a company and insists on a special invoice for tax deduction, this should be clarified during the lease negotiation.

III. Individual Income Tax: 20% on Rental Income

Rental income from personal property is classified as 'rental income' under individual income tax, subject to a 20% proportional tax rate. The tax is not simply 20% of the rental income; there are several deductible items in between:

• Taxes and surcharges paid during the leasing process can be deducted from rental income with a tax payment certificate;
• Maintenance costs borne by you, with valid and accurate vouchers, can be deducted, limited to 800 yuan per time. If the deduction cannot be fully made in one go, it can be carried forward to the next period until fully deducted (Provisions on Several Issues Concerning the Collection of Individual Income Tax, Guoshui Fa [1994] No. 089, Article 6);
• If the income each time does not exceed 4000 yuan, deduct 800 yuan in expenses; if over 4000 yuan, deduct 20% in expenses.

Let's calculate using the previous example: A monthly rent of 10,000 CNY, first deduct the property tax for the month at 1200 CNY and stamp duty at 10 CNY, leaving 8790 CNY. Then, deduct 20% in expenses, which is 1758 CNY, resulting in a taxable income of 7032 CNY. The individual income tax would be 1406 CNY/month, approximately 16,900 CNY/year.

IV. Stamp Duty and Urban Land Use Tax

A lease contract is a taxable document under the stamp duty, calculated at one per thousand of the rent, and both parties are required to pay. For an annual rent of 120,000 CNY, the stamp duty would be 120 CNY. Although the amount is small, missing it means missing it.

The urban land use tax is based on the actual area of land occupied multiplied by the local grade tax rate. Different areas in Yiwu have different land grades, and the specific tax rate standards depend on the recognition of the competent tax authority, without a uniform figure. Owners of self-owned factories or shops with independent courtyards should not assume they are exempt from this tax.

V. Looking at the Accounts as a Whole

The total of the three calculable parts is about 31,400 CNY, accounting for about 26% of the 120,000 CNY annual rent. Many business owners only consider that “the surrounding area rents at this price” when quoting, without factoring in these 26% costs, and only realize at the end of the year that they have been working for nothing.

We review such accounts every month. Jinfan (Yiwu) Tax & Finance Management Co., Ltd. has been operating in Yiwu for ten years, handling accounts for International Trade City, Huangyuan Market, and Beixiazhu. Out of ten shop landlords, eight have only reported VAT, completely forgetting about property tax. If you are unsure about which taxes you need to pay, you can call 135 6699 1667 for clarification before making any decisions.

VI. Frequently Asked Questions

1. If I sublet a stall, do I need to pay property tax?

The taxpayer for property tax is the owner of the property. If you rent a stall from the market and then sublet it, generally, the property tax is not your responsibility, but VAT and individual income tax cannot be avoided. The difference in rent from subleasing is still considered taxable income. The final determination should be based on the competent tax authority.

2. If the tenant does not require an invoice, does that mean there is no need to declare?

No. The obligation to file a tax return is based on whether a taxable event has occurred, not on whether an invoice has been issued. Long-term failure to record rental income, along with discrepancies in property and utility records, can actually be a risk point.

3. Is renting under the name of an individual business the same as renting by a natural person?

Not exactly. If the rent is recorded in the books of the individual business and falls within its scope of operations, it is typically treated as business income. In contrast, when a natural person rents out property, it is considered rental income from property, with different deductible items and tax rates. If the individual business does not maintain proper accounting and is subject to assessed collection, the situation changes again. You can refer to the article on assessed collection for individual businesses without proper accounting.

4. Are there any tax incentives to reduce the amount due?

The tax incentives for small and micro enterprises are adjusted annually, so policies from last year may not apply this year. First, confirm eligibility and the applicable year before calculating. You can refer to the summary of tax incentives for small and micro enterprises in 2026. For specific filing requirements, follow the guidance of your local tax authority.

Sources and References

• Provisional Regulations of the People's Republic of China on Real Estate Tax (Articles 3, 4, 5, 7): http://fgk.chinatax.gov.cn/zcfgk/c100010/c5196866/content.html
• Interim Measures for the Administration of Value-Added Tax Collection on Immovable Property Leasing Services (Announcement No. 16 of 2016 by the State Administration of Taxation): http://fgk.chinatax.gov.cn/zcfgk/c100012/c5194629/content.html
• Announcement of the Ministry of Finance and the State Administration of Taxation on the Connection of VAT Preferential Policies after the Implementation of the VAT Law (Announcement No. 10 of 2026 by the Ministry of Finance and the State Administration of Taxation, January 30, 2026): http://fgk.chinatax.gov.cn/zcfgk/c102416/c5247434/content.html
• Provisions on Several Issues Concerning the Collection of Individual Income Tax (Guoshui Fa [1994] No. 089) Article 6: http://fgk.chinatax.gov.cn/zcfgk/c100011/c5216297/content.html

The policies cited in this article are based on the currently effective versions. For specific application, please follow the guidance of your local tax authority; the examples involving amounts are for illustrative purposes only and do not constitute tax advice. It is common practice to entrust bookkeeping services with daily bookkeeping and filing tasks.

The calculation of rental income varies depending on the ownership status, use of the property, and the taxpayer's identity. If you are unsure, you can call us at 135 6699 1667 to clarify, and then proceed with the process yourself if you prefer.