China expands corporate tax cuts for hi-tech firms in drive to lure more foreign investment
Services companies benefit from expansion of preferential rate
China will expand corporate tax rate cuts for hi-tech services firms nationwide in an effort to attract more foreign capital into its high tech, high value-added services industry.
The tax rate for hi-tech services firms will be reduced to 15 per cent, effective January 1 this year, the Ministry of Finance said in a statement on its website on Friday. The ministry did not provide details on previous tax rates.
The preferential tax rate is the same as the rate the ministry gave to 21 major cities in 2014, as part of its trial programme to boost the overall industry’s competitiveness.
China’s leaders are counting on growth in services and consumption to rebalance their growth model from its heavy reliance on investment and exports.
The services sector accounts for over half of the economy.
Firms eligible for the tax cuts range from information technology outsourcing and business process outsourcing to knowledge process outsourcing, the ministry added.
Revenues from hi-tech services business will have to account for half of firms’ annual revenue for companies to apply for the tax incentives, while offshore outsourcing business will have to take up more than 35 per cent of the annual revenue.
China’s economy has surprised global financial markets and investors with robust growth of nearly 7 per cent so far this year, driven by a renaissance in long-ailing “smokestack” industries such as steel.
But under the weight of official measures to cool heated housing prices and a government crackdown on pollution, property and factory output are starting to cool, with analysts expecting China to post slower growth in the fourth quarter.
