Taxing times for China's foreign firms

October 12, 2007 The good old days of preferential tax treatment for foreign companies in China are set to end as of January 1, 2008, but Chinese tax advisers say they may see some light amid the pending financial gloom - that is if the Beijing bureaucrats can agree on common definitions for situations such as when, exactly, an equity transfer is legally deemed to have occurred. Following years of criticisms that the dual income tax mechanism was unfair to domestic companies, the National People's Congress (NPC), approved the new Corporate Income Tax Law on March 16 this year. It sets a unified income tax rate for both domestic and foreign companies of 25%, rather than the 15% rate the foreign enterprises have enjoyed for decades. Domestic firms are currently subject to a 33% rate.

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