Draft corporate tax law stipulates one tax rate for domestic and foreign companies

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Source: CCTV.com | 12-30-2006 08:50

Special Report:   2007 NPC & CPPCC

The draft corporate income tax submitted for deliberation to the Standing Committee of the Tenth National People's Congress has attracted great attention.

It combines the two separate laws for domestic and for foreign companies, creating one new law and stipulating just one tax rate for both.

At present, foreign companies enjoy a preferential income tax rate of 15 or 24 percent. Under the new draft law, the same income tax rate of 25 percent will be applied to all companies, whether Chinese or foreign. Officials think the new law will not have a negative influence on the foreign investors.

Shi Yaobin, Ministry of Finance, said, "Under the new law, new and high technology companies, domestic or foreign will still enjoy a preferential income tax rate of 15 percent. International experience proves the change will not hinder foreign investments."

The draft law also takes into consideration companies that will no longer receive preferential treatment.

Shi Yaobin, said, "We have outlined a transition period for those companies who are used to enjoying a low rate of income tax, in order to gradually increase their rate to 25 percent. "

The Ministry of Finance official also said the change of rate to corporate income tax will in fact reduce revenue into central finance, but within bearable limits. The draft law has been passed for deliberation. Even if it is approved, the soonest implementation will be January 2008.

 

Editor:Du Xiaodan