TUESDAY, MAY 31, 2005
Existing foreign firms in China to get 5-yr tax sop
REUTERS
BEIJING: Businesses already set up when China scraps tax breaks for foreign-funded firms will get a five-year exemption, the China Daily said on Monday, reporting for the first the duration of the transition period.
China had decided to unify the tax rate for local and foreign firms from '07 to create a fairer market environment, the paper cited the head of a government advisory body under the Ministry of Finance as saying.
President of the Institute of Fiscal Science Jia Kang did not give the level of the unified rate, expected by some analysts to be around 24 - 25%, but said foreign-funded firms set up before '07 would enjoy current tax breaks until '11, it said.
The Financial Times quoted Chinese vice finance minister Lou Jiwei as saying earlier this month that China would not end tax breaks for firms with foreign investment before the second half of '06 at the earliest. Some analysts have expected the government to implement a unified tax rate by early '07.
Many foreign-funded firms enjoy preferential income tax rates as low as 15% set by local bodies while local firms are taxed at 33%. China has long considered ending preferential tax rates for foreign-funded firms, but analysts say reforms have progressed slowly due to resistance from local officials eager to attract more foreign investment.
The tax breaks, in place for some two decades, had helped China secure a total of $562bn in foreign direct investment by the end of ' 04, the paper said. China had approved the establishment of more than 500,000 foreign-funded firms, it said.
China has been opening its domestic market further to foreigners, according to pledges made when Beijing joined the WTO in late ' 01.
Foreign companies already well established in China and known to have made profits there include Volkswagen and Eastman Kodak, but many others have made little or no money from their Chinese operations.
Copyright © 2005 Times Internet Limited.