Merger Of Two Taxes Favorable Foreign Trade In China
Since the reform and opening up, in order to haul foreign investment, China has formulated a series of foreign tax credits preferential policies, the implementation of these policies and measures making the scale of foreign businesses rapid beefing up.
After Chinas accession to the WTO, tariffs dropped significantly and the degree of market opening further increase. In order to create a fair competitive market environment and promote foreign and domestic - funded enterprises enjoying equal national treatment, China combines Provisional Regulations on Enterprise Income Tax of Peoples Republic of China which applying domestic enterprises and Regulations on Enterprises with Foreign Investment and Foreign Enterprises Income Tax of Peoples Republic of China which applying to the foreign enterprises to one tax act, and to appliance a unified tax scale of 25 %.
Increase tax burden of foreign - funded enterprises in the short - term
After the two taxes combined, the new tax law abolished two exemptions and three halved tax incentives for foreign - funded enterprises, the income tax rate of foreign - funded enterprises from 15 % up to 25 % and increase the tax burden on foreign - funded enterprises in the short term. In addition, for some small and stanchion - sized foreign - funded enterprises with high - energy consumption, compound of the two taxes canceled the related preferential policies and the corporate profits are opposite a critical point, which affects the reinvestment enthusiasm of foreign - funded enterprises in a certain extent.
Optimize the market environment and industry structure
However, according to the extant effects of merger of two taxes, foreign trade paid more attention to Chinas stable economic and political environment, the huge market future, low labor and resource endowments, from a macro point of view, the mingle of two taxes will not damage the long - term interests of the foreign - funded enterprises, but can promote the foreign trade in China.
First, beneath the aged tax system, super - national treatment on income tax of foreign - funded enterprises making domestic enterprises at a cost disadvantage, so that there are many concocted foreign investments. After combined two taxes, the preferential system instead of GSP, so that domestic enterprises can notion on the equivalent original line with the foreign - funded enterprises. This can create a fair market competition environment and promote the healthy development of Chinas economy.
Secondly, from an international point of view, the existing 25 % corporate income tax standard is in the middle and lower level, if foreign investors invest a marked industry or field of companies, consonant as energy saving, sewage pollution control, etc. can also enjoy preferential policies. Foreign - funded enterprises have good scientific and technological innovations, so they will gain a competitive advantage of these fields in a entirely long period.
In supplement, in the beginning of the reform and opening up, some of the senile and famous foreign - funded enterprises invested in China for the various preferential policies and Chinas embryonic market, show preferential dependence to a certain extent. But with the implementation of the new tax law, valuable the quality of labor and steadily accommodating the infrastructure and market system in China, Chinas industrial structure continuously optimize, the low - tech and low - appraisal - in addition foreign money has become high - tech and high - cost - else one, the quality of foreign investment highly improve.
In short, merger of two taxes will administer a favorable opportunity for Chinas industrial structure upgrading and market environment accumulation, foreign - funded enterprises can find the new economic hike point in the Chinese market on the basis of the new interpretation of tax law and to maximize corporate profits.
