Foreign Firms Urge China To Phase In Tax Reforms

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

17 January 2005

Several dozen multinational firms with a presence in China are asking the Chinese authorities to build a period of transition into proposed tax reforms that will unify the tax system for domestic and foreign firms, the mainland’s media reported last week.

According to a report in the China Business Times, 54 international firms, including Microsoft, Eriksson, Sony and Dell intend to submit a report to the State Council Legislative Affairs Office requesting that they be given a five to ten year grace period before switching to a new tax regime.

Under current Chinese tax rules, foreign funded firms pay income tax at a rate of 15%, whilst the rate for domestic firms stands at 33%.

However, this is likely to change soon, under a restructuring of the country’s tax system announced by director general of the State Administration of Taxation, Xie Xuren, in a news conference last week.

These reforms will also include an overhaul of the personal income tax system and a widening of the consumption tax net, although the government has not yet committed itself to a legislative timetable.

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