China Could Achieve Corporate Tax Unification In 2007

by Mary Swire, Tax-News.com, Hong Kong

22 March 2006

China could introduce its much discussed unified corporate tax rate for domestic and foreign-funded enterprises as early as next year, according to one senior Finance Ministry official.

Jia Kang, president of the Institute of Fiscal Science under the Ministry of Finance was quoted by Dow Jones Newswires on Tuesday as stating that Beijing has not excluded the possibility of introducing a single rate of corporate tax for all companies by 2007 "if things go smoothly".

While the introduction of a unified corporate tax rate has been on the cards in China for some years, it seems that Beijing is now keen to press ahead with new legislation bringing the change into effect.

Earlier in the month, Vice Finance Minister Lou Jiwei revealed in a report published by the Xinhua state news service that the State Council will submit to the Standing Committee of the National People's Congress (NPC) plans for a new corporate tax law by August 2006.

Currently, the official rate of corporate tax in China is 33%. However, in an attempt to attract higher levels of foreign investment as the authorities sought to develop a market-based economy, various deductions and waivers have allowed foreign-funded firms to pay tax at an effective rate of 14%, whilst domestic firms effectively pay corporate tax at about 24%.

It is thought that the new unified corporate tax rate will be set at or near 25%.

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