In March 2007 The National People’s Congress of China agreed to a new corporate income tax law. The law, which comes into effect on January 1st 2008, will unify the income tax rate for domestic and foreign enterprises at 25% as part of the recent government policy of improving the level and quality of foreign investment.

All companies regardless of type, ownership or location will be subject to the same income tax rate however, some preferential rates will still be in place in encouraged sectors such as hi-tech enterprises, agriculture and fishery. Businesses who received preferential rates under the old system will have a 5 year plan to integrate into the new system.

The implementation of this law will create a level playing field for all enterprises and result in a more transparent and efficient market place. The overall impact on foreign investment is likely to be limited as tax issues are no longer a primary concern for overseas investors, and it will encourage China’s continued economic growth.

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Source InterChina Consulting