Merger Of Two Taxes Favorable Foreign Trade In China
Since the reform and opening up, in order to draw 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 evolution.
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 gadget a unified tax ratio 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 ratio 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 stake - sized foreign - funded enterprises with high - energy consumption, combine of the two taxes canceled the related preferential policies and the corporate profits are opposed 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 coeval effects of merger of two taxes, foreign trade paid more attention to Chinas stable economic and political environment, the huge market plausible, 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, beneath the senile tax system, super - national treatment on income tax of foreign - funded enterprises making domestic enterprises at a cost disadvantage, so that there are many simulated foreign investments. After combined two taxes, the preferential system instead of GSP, so that domestic enterprises can disposition on the identical primitive 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 singular industry or field of companies, selfsame 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 appendage, in the beginning of the reform and opening up, some of the mature and famous foreign - funded enterprises invested in China for the various preferential policies and Chinas unrealized market, ensue preferential dependence to a certain extent. But with the implementation of the new tax law, sympathetic the quality of labor and steadily benevolent the infrastructure and market system in China, Chinas industrial structure continuously optimize, the low - tech and low - expense - increased foreign money has become high - tech and high - amount - besides one, the quality of foreign investment notably improve.
In short, merger of two taxes will support a favorable opportunity for Chinas industrial structure upgrading and market environment swelling, foreign - funded enterprises can find the new economic evolvement point in the Chinese market on the basis of the new interpretation of tax law and to maximize corporate profits.
