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The dual corporate income tax in China: the impact of unification

  • van der Hoek, M. Peter
  • Kong, Shuhong
  • Li, Zhenzi

For many years, foreign funded companies in China enjoyed a relatively low tax rate and a series of preferential policies which were aimed at encouraging foreign direct investment in China. By adopting a new law in 2007, however, the National People's Congress proclaimed the end of the dual corporate-income-tax system. From 2008, the preferential tax treatment of foreign capital will be phased out. As a result, the income tax rate for domestic and foreign funded companies will be unified at the rate of 25%. This paper explores the impact of the dual corporate income tax system on both domestic and foreign funded enterprises and discusses the possible effects of the unification.

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File URL: http://mpra.ub.uni-muenchen.de/11547/1/MPRA_paper_11547.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 11547.

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Date of creation: May 2008
Date of revision: Aug 2008
Publication status: Published in Public Finance and Management 4.8(2008): pp. 655-677
Handle: RePEc:pra:mprapa:11547
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  1. John Whalley & Li Wang, 2007. "The Unified Enterprise Tax and SOEs in China," NBER Working Papers 12899, National Bureau of Economic Research, Inc.
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