New tax structure levels the playing field

PUBLISHED : Tuesday, 13 March, 2007, 12:00am
UPDATED : Tuesday, 13 March, 2007, 12:00am

Although the official corporate income tax rate in the mainland is 33 per cent, the actual tax rates for domestic and foreign-invested firms vary.

Foreign firms registered in designated development zones enjoy a 15 per cent tax rate. They are also entitled to a 'two-year exemption, three years in half' (0 per cent in the first two years and 7.5 per cent in the next three) tax incentive scheme in the first five years. In contrast, domestic companies often had to pay the full tax rate of 33 per cent, JP Morgan analyst John Tang said in a report.

The new tax reform aims to create a level playing field for both domestic and foreign firms.

Both will be taxed at about 25 per cent. In general, the tax rate of state-owned enterprises would drop and that of foreign-invested firms would rise, Mr Tang said.