China Planning Unified Tax Regime For Chinese,
Foreign Corporations
The Chinese government is planning a unified tax plan
which would give equal treatment and taxation to Chinese
and foreign companies, in accordance with China's rules
of accession to the World Trade Organization (WTO).
Up until now, Chinese local governments have frequently
introduced tax incentives to attract foreign investment
on a per-project basis. In some cases, these tax holidays
last for as long as five years for major infrastructure
investments. Currently, most non-Chinese corporations
in China pay a rate of 24% or less. Under the new rules
being circulated in the government, these incentives would
be abolished, while current investors would have a grandfather
clause, protecting their current investments and incentive
packages.
Different tax rates have been floated, including 25%,
27% and 30%. So far, these are internal figures which
are being floated in the Chinese government in draft forms
for internal discussion. The new unified tax rate will
go into effect sometime before the end of the year.
The new tax rate would go into effect at approximately
the same time as the new body of laws lifting restrictions
on non-Chinese companies in retailing and distribution,
and banning discrimination against them. The current laws
favor larger, well-capitalized firms from outside China
in setting up joint ventures in China.
When the new laws are announced, a new round of investment
in China from smaller non-Chinese firms is expected to
take place, as they position themselves for a piece of
the action in China.
Before you go, did you like this article?
If so, you can receive a free email newsletter version
each weekday. Sign up using the China Business Express
form on this page.
