Taxes are rarely an easy issue, even at the best of times, so proposed changes to the tax law (see: “Equally Taxing Times Ahead”) have been causing concern in the foreign investment community. The proposal to equalize tax rates for local and foreign-invested companies was proposed by the Ministry of Finance as part of the post-WTO “level playing field” for businesses, and has also been prompted by resentment of the preferential treatment received by foreign investors. However, Caijing magazine now reports that introduction of the proposed unified rates has been delayed, and will not be on the legislative agenda for this year:
“Opposition from the Ministry of Commerce as well as eastern provinces has derailed plans to enact a law equalizing income tax rates for both domestic and foreign companies. Companies with foreign investors have enjoyed an income tax rate of 15 percent since 1991, while domestic businesses are required to pay nearly 25 percent of their income.”
This action may please foreign investors, who have been under the spotlight recently, and who have been subject to increasing restrictions (see “Two Faces for Foreign M&A“). Still, policies can change quickly, and this is a battle being fought on several fronts.
See news source:
New Income Tax Law Delayed