China has proposed a draft law to unify the income tax rate for both foreign
and domestic firms at 25 percent and provide preferential tax policies to high
technology firms, environment-protection, energy-saving and production safety.
The draft law also clarifies tax-deduction policies.
The following are the major changes to the tax codes.
Tax rate
Foreign and domestic firms will both pay a 25 percent
income tax.
|
NPC deputies listen to Finance Minister Jin Renqing explain the draft
tax law yesterday at the ongoing NPC session. Wu
Zhiyi |
Domestic firms are currently required to pay 33 percent, as stipulated by the
Interim Regulations on the Enterprise Income Tax, which took effect in 1994.
Foreign-funded manufacturers pay an income tax rate of 15 or 24 percent, as
stipulated by the Income Tax Law for Enterprises with Foreign Investment and
Foreign Enterprises, which took effect in 1991.
Foreign firms that enjoy preferential tax rates will be given a 5-year grace
period for the new rate to be phased in.
High-technology firms that the State decides need major support will be
allowed to pay a tax rate of 15 percent.
Venture capital enterprises and companies that invest in
environment-protection, energy and water conservation and work safety will be
eligible for an fuller range of preferential tax treatment. Details have not yet
been specified, but will be stipulated in the implementation rules.
Eligible small low-profit-earning companies will be allowed to pay a tax rate
of 20 percent.
Existing tax breaks for firms investing in infrastructure like ports, docks,
airports, railways, highways, power and water conservancy that are supported by
the State will remain in force.
Tax breaks for firms in the agriculture, forestry, stock raising and
fisheries sectors will continue.
The existing 50 percent tax break for export-oriented foreign companies and
the preferential tax treatment for manufacturing-oriented foreign firms will be
discontinued.
Firms that make efficient use of resources and raw materials and enterprises
that provide public service will no longer be given direct tax breaks or
exemptions, but will benefit from new preferential tax rates.
New high-tech firms that need priority support from the State and are located
in a special economic zone like Shenzhen or in a State Council-appointed special
area like Shanghai's Pudong New Area will receive "transitional" tax
preferential treatment.
Existing preferential income tax policies aimed at encouraging enterprises to
invest in economically underdeveloped western regions will continue.
(China Daily 03/09/2007 page6)
