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 production.
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 Brief 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 machine a unified tax proportion 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 degree 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 rampart - sized foreign - funded enterprises with high - energy consumption, alloy 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 up-to-date effects of merger of two taxes, foreign trade paid more attention to Chinas stable economic and political environment, the huge market dormant, low labor and resource endowments, from a macro point of view, the alloy of two taxes will not damage the long - term interests of the foreign - funded enterprises, but can promote the foreign trade in China.
First, subservient the mature tax system, super - national treatment on income tax of foreign - funded enterprises making domestic enterprises at a cost disadvantage, so that there are many artificial foreign investments. After combined two taxes, the preferential system instead of GSP, so that domestic enterprises can sentiment on the identical initial 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 ratio is in the middle and lower level, if foreign investors invest a marked industry or field of companies, equaling 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 quite long period.
In postscript, 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 unrealized market, come about preferential dependence to a certain extent. But with the implementation of the new tax law, significant the quality of labor and steadily friendly the infrastructure and market system in China, Chinas industrial structure continuously optimize, the low - tech and low - value - else foreign important has become high - tech and high - cost - enhanced one, the quality of foreign investment inimitably improve.
In short, merger of two taxes will support a favorable opportunity for Chinas industrial structure upgrading and market environment accretion, foreign - funded enterprises can find the new economic production point in the Chinese market on the basis of the new interpretation of tax law and to maximize corporate profits.
