In case one of my readers here is interested in starting a domestic business in China, I happened to stumble upon the new income tax rate for corporations, effective Jan 2008.
Apparently this is useful information, says Pacific Epoch, although I think that foreigners who are unknowledgable in Chinese culture and Mandarin, and have not been aware of this law, is few in number. Anyway, this is for your information (and mine, for future reference). For historical references, the old tax law states that domestic companies were taxed at 33%, unless they are low profit, in which case they were taxed at 27 to 18%. Foreign companies were taxed at 24 to 15%. As for the new enterprise income tax law...
all companies, whether domestic or foreign, are taxed at 25%. As simple (or difficult) as that. However, in the fine print, if a comapny is regarded as high tech by regulators, or if the company is located in a specific favorable region, then the income tax may be lowered to 15%. Previously, all eligible companies for high tech status must be situated within high tech parks, but this no longer holds--any company located anywhere can apply for high tech status. The trade-off is that obtaining this status is getting harder by the minute, as national ministries are taking over this regulatory job that regional departments were previously responsible for.
Furthermore, all companies established within the five special economic zone cities (Shenzhen, Zhuhai, Shantou, Xiamen and Hainan) and Shanghai Pudong Development New Areas, are taxed under a 2+3 tax scheme (zero tax for the first two years, half the rate for the following three). Unfortunately for foreign companies, who previously had the wonderful experience of the 2+3 tax scheme and a 15% tax rate (just for being foreign) will no longer have the benefits, although current 2+3 tax schemes will continue until they expire. Seems like China is heading in a new direction after all.
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