For those considering the sole proprietorship route in China, this article outlines the status known as 个体工商户 (Individual Industrial and Commercial Household), including its availability, registration process, and the practical tax considerations that apply in 2025. Data is based exclusively on the most current information provided by official Chinese government sources.
Overview of Sole Proprietorship (Individual Industrial and Commercial Household)
China recognizes a specific form of sole proprietorship called 个体工商户 (Individual Industrial and Commercial Household), which enables individuals to register and conduct business as self-employed persons without establishing a separate legal entity. This format is particularly prevalent among small business owners, independent contractors, and service providers across the country. In 2025, this system continues to be actively used and officially recognized.
Registration Process and Eligibility
Registration as an Individual Industrial and Commercial Household is accessible to all Chinese citizens wishing to operate a business independently. The process is managed by the Administration for Market Regulation. Typically, applicants must submit personal identification and a simple business plan, after which local authorities handle formal registration. Importantly, there is no requirement to establish a separate legal entity, simplifying market entry for solo operators.
Table: Key Features of the Individual Industrial and Commercial Household (2025)
| Feature | Description |
|---|---|
| Status Name | 个体工商户 (Individual Industrial and Commercial Household) |
| Eligibility | Chinese citizens (individuals) |
| Legal Form | No separate legal entity (individual status) |
| Registration Authority | Administration for Market Regulation |
| Main Tax System | Individual Income Tax (IIT) with progressive rates |
| IIT Tax Rates (2025) | 5% to 35% (progressive on taxable income) |
| VAT Rate (for eligible small-scale taxpayers) | 3% |
| Recognition | Actively recognized and regulated by Chinese authorities |
Taxation Details for Individual Industrial and Commercial Households
Once registered as an Individual Industrial and Commercial Household, your business income is taxed under the Individual Income Tax (IIT) framework. The relevant rates in 2025 remain progressive, with brackets ranging from 5% up to 35% depending on your taxable income. For those qualifying as small-scale taxpayers, a simplified VAT regime applies at 3%. This structure markedly simplifies tax compliance for micro-entrepreneurs compared to the corporate tax regime applicable to companies.
Tax Rates Table (2025)
| Tax Category | Applicable Rate (%) | Income/Eligibility |
|---|---|---|
| Individual Income Tax (IIT) | 5%–35% | Applied progressively based on total taxable income (CNY, annual) |
| VAT (Small-scale taxpayers) | 3% | Eligible Individual Industrial and Commercial Households |
For the most accurate and current regulations, the State Taxation Administration remains the authoritative resource.
Official Government Sources
- State Taxation Administration
- Administration for Market Regulation
- Central People’s Government of the People’s Republic of China
Pro Tips for Establishing an Individual Industrial and Commercial Household in China
- Prepare all requisite identification and a simple business plan before approaching your local Administration for Market Regulation office to streamline the application process.
- Track your taxable income closely to ensure you are applying the correct IIT progressive rates and benefiting from any simplified measures for small-scale taxpayers.
- Take advantage of the threshold for simplified VAT (3%) if your business qualifies as a small-scale taxpayer, which substantially reduces administrative burden.
- Consult official resources regularly as regulations and procedures are subject to updates from the State Taxation Administration and local authorities.
Individual Industrial and Commercial Household status remains easily accessible for Chinese citizens in 2025, offering a straightforward route to operate a business under a sole proprietorship framework. Registration is practical and streamlined, with clear access to both progressive income tax rates and a simplified VAT regime where applicable. Keeping informed by checking official regulatory bodies will ensure ongoing compliance and help you leverage the benefits of this individual business status in China.