China is bridging the tax burdens between domestic and foreign companies in the country, ending the decades-long favorable treatment for foreign enterprises.
China will charge foreign firms operating here with two additional taxes—a construction tax and an education surcharge—effective December 1, according to the State Council. The two measures marked the beginning of a standard national tax treatment for foreign and Chinese enterprises.
At the beginning of reform and opening up in the late 1970s, China launched super-preferential tax policies for international companies in a bid to propel its economic growth. The multinationals were exempt from some taxes. Over the past few years, the preferential policies have gradually been phased out.
The recent adjustment means a 10 percent rise of costs for foreign operations in China.
"I don't think this will exert any negative effect on the growth of foreign direct investment in China, given China's robust economic growth and increasing domestic consumption, which will steadily help the market maintain its appeal to foreign businesses," said Wang Zhile, Director of the Research Center on Multinationals under the Ministry of Commerce (MOFCOM). |