The first batch of nine mainland firms that listed H shares in Hong Kong are facing billions of yuan in back-tax payments as the special rate on their income tax had been scrapped years ago, according to Shanghai Securities News.
Those firms, including Maanshan Iron & Steel and Tsingtao Brewery, were granted a special tax rate of 15 per cent instead of the normal 33 per cent by the State Council when they listed in 1993 as Beijing hoped to make their shares more attractive.
However, the special treatment had expired and it was unclear if the State Council had extended it, market watchers said. It also remained unclear when the special treatment expired and whether the companies needed to make up for the tax payment shortfalls, they said
The State Administration of Tax ordered local authorities to put an immediate halt to the favourable income tax policies, Shanghai Securities News said yesterday.
'Such preferential income tax policies have expired but are still in execution,' it said. 'The differences in income tax arising from the application of expired preferential income tax policies in previous years shall be dealt with [according to the tax law].'
Other companies that received the special rate included Dongfang Electrical Machinery, Sinopec Shanghai Petrochemical, Beiren Printing Machinery, Guangzhou Shipyard International, Sinopec Yizheng Chemical Fibre, Jiaoda Kunji High-Tech and Tianjin Capital Environment Protection.