Foreign firms in China to lose tax privileges

Jan 4, 2007

BEIJING - While foreign-invested firms may not like it, Chinese businesses are cheering as a new, more even playing field on which the two compete will bring an end to many special privileges enjoyed by overseas companies.

As of January 1, Sino-foreign joint ventures and wholly foreign-owned firms are no longer exempt from paying land-use tax. Also, later this year a new corporate income tax structure is expected to be passed and implemented that will see foreign and domestic firms taxed at the same rate, ending years of special corporate tax breaks for overseas firms.

The land-use or property-tax rate will now apply equally to both local and foreign developers and will triple the old rate set in 1988.

In large cities the annual property tax rate will range from 1.5 yuan to 30 yuan (19 US cents to $3.85) per square meter depending on its location and type of use. In medium-sized cities the rate will range from 1.2 yuan to 24 yuan per square meter, in small cities the rate will vary from 0.9 to 18 yuan and counties, townships and mining areas property will be taxed at a rate of between 0.6 yuan to 12 yuan per square meter per year.

http://www.atimes.com/atimes/China_Business/IA04Cb04.html


<snip> Late last month, China's top legislature began discussing a new law on corporate income tax that is likely to result in a unified tax rate of 25% for both domestic and foreign companies. If the law is approved, foreign firms are likely to lose a major tax advantage.

Despite a stated corporate tax rate of 33%, foreign firms often benefit from tax waivers, credits and incentives that bring their tax rate down to an average of 15%. Domestic companies on average are taxed at a rate of 24%.

US companies get, I think it is 5 years, tax free. So at 4 years and 11 months, they change their corporate structure or name or move their factory and get another 5 years tax free.

Needless to say, China's getting a wee bit pissed off.