The Standing Committee of China's National People's Congress, China's highest legislative organ, is set to review proposals to unify the rate of corporate tax paid by domestic and foreign-backed enterprises.
According to a report by state news service Xinhua, the NPC will review the legislation on December 24. If approved, it will likely result in an increase in corporate tax for foreign companies, while domestic entities will see their corporate tax rate cut.
Under current corporate tax law, domestic enterprises pay tax at a rate of 33%, while foreign-backed firms pay 30%. However, foreign companies are able to utilise deductions and other benefits to whittle down their effective corporate tax rate to as low as 13%.
Details of the new tax policy have yet to be released by the Chinese government, but it is thought that it will lead to a single rate of corporate tax of about 25% for all companies. Wang Jianfan, vice director of the Ministry of Finance's tax policy department, also revealed earlier this year that the new laws will provide tax breaks for firms in certain industries.
Government officials have suggested a tentative date of January 2008 for the introduction of the unified corporate tax law.
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