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Corporate income tax rate is modest

Mar '07
The Fifth Session of the 10th National People's Congress held its second plenary meeting on the morning of March 8, 2007. Minister of Finance Jin Renqing made a statement on the 'PRC Enterprise Income Tax Law (draft)'. He said the 25 percent rate set by the Bill is on the modest-low side in international arena. It will help enterprises to enhance their competitiveness and attract foreign investments.

Jin Renqing said that the existing income tax rates for both domestically funded and foreign-funded enterprises are 33 percent. Meanwhile, preferential tax levels of 24 pecent and 15 percent are implemented on foreign-funded enterprises in some special regions. Preferential tax levels of 27 percent and 18 percent are imposed on domestically funded enterprises, which make very low profits.

Too many rate grades create wide gap between nominal rates and the real tax to different types of enterprises. Therefore, it is necessary to give the harmonization of income tax rates for domestically funded and foreign funded enterprises. The draft sets the new tax rate at 25 percent.

The main consideration is based on the reflection to reduce the tax burden of domestic enterprises and foreign-funded enterprises. At the same time, the state can take the reduced fiscal under control. In addition, the Bill also has considered the tax rate levels in the world, especially the surrounding countries (regions).

The worldwide average rate of 159 countries, which collect enterprise income tax, is at 28.6 percent, and China's 18 neighboring nations impose an average rate of 26.7 percent.

Fibre2fashion, News Desk - China

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