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Main points of draft Corporate Income Tax Law

Source: | 03-08-2007 16:10

Special Report:   2007 NPC & CPPCC sessions

The corporate income tax law combines separate laws for domestic and for foreign companies. It sets a uniform rate for domestic and foreign companies at 25 percent.

At present, the income tax rate on domestic and foreign-funded enterprises is 33 percent. But foreign-funded enterprises in certain regions have a preferential rate of 15-24 percent, and for domestic low-profit enterprises, there are two brackets of special rates of 18 and 27 percent.

The Draft law integrates existing preferential income tax policies in five ways, taking into account tax reform in various countries.

First, a preferential rate of 20 percent for eligible small low-profit enterprises and 15 percent for hi-tech enterprises receiving priority support from the State. Tax credits will go to capital venture enterprises and those investing in environmental protection, energy and water conservation, and work safety.

Second, the Draft retains the preferential tax policy for investment in agriculture, forestry, animal husbandry, fisheries and infrastructure construction.

Third, the Draft replaces the policy of direct tax reduction or exemption with a preferential policy for enterprises in labor service, welfare and those making comprehensive use of resources.

Fourth, transitional preferential tax treatment for new hi-tech enterprises receiving priority support from the State and located in specified special economic and technological zones. Preferential tax policies will continue for other State-defined enterprises whose development is encouraged.

Fifth, elimination of certain preferential policies. This includes the regular tax reduction and exemption for production-oriented foreign-funded enterprises as well as the 50 percent tax reduction for export-oriented foreign-funded enterprises.

The draft introduces tax reduction and exemption to encourage environmental protection and technological progress.

Transitional measures will be used to ease the burden which the new law would create on certain old enterprises. These enterprises, currently entitled to a 15 or 24 percent tax rate, will have a gradually rising transitional rate over five years.


Editor:Du Xiaodan