Tax change means level playing field for foreign, domestic companies
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Foreign-funded companies will no longer be exempted from city maintenance and construction taxes beginning Wednesday in a decision by the Chinese government.
China will begin collecting city maintenance and construction taxes and education-supporting taxes from foreign companies, and individuals with commercial interests in the country, effective Dec. 1.
The two taxation items target companies, Zhang Hanya, chairman of the Investment Association of China (IAC) told Xinhua Tuesday, saying the move will create a level playing field, in terms of tax, for all companies operating in the country.
Since the middle of 1980s, domestic companies have been paying city maintenance and construction taxes and education-supporting taxes, which their foreign counterparts, including solely foreign-funded companies and joint ventures, were not required to pay, Zhang said.
"Since China's reform and opening-up, China has provided preferential policies in order to attract foreign investment to boost growth. Foreign-funded companies actually have enjoyed special treatment in terms of land use and taxation," he said.
"China's domestic enterprises have been paying these taxes for decades while foreign companies haven't. The country now seeks a unified taxation standard, this is an improvement and will create a more sound investment climate," Zhang said.
But the move has been criticised by some foreign businesses.
Zhang said this might be in part due to the mistaken belief that the taxes were created especially for foreign companies.
This is not the first change of the kind to China's taxation laws in recent years. China unified income tax rates for both domestic and foreign-funded companies at 25 percent on January 1, 2008, with the previous rate for domestic firms at 33 percent and that for foreign firms at 15 percent.
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