International Law

China publishes implementation rules for new corporate income tax

By Andy Scott

By Andy Scott

SHANGHAI, Dec. 14 ? China?s State Council approved the long-awaited implementation rules for the country?s new corporate income tax law on December 6.

The Detailed Implementation Regulations, prepared by the Ministry of Finance and the State Administration of Taxation, contains eight chapters and 133 articles. Here we look at some of the more important changes and provisions that may effect foreign investment in China.

Incentives
One of the most attractive incentive programs under the new tax law is the high/new technology enterprise incentive which offers a reduced tax rate of 15 percent. There is also a plan, subject to the State Council?s final approval, to extend the withholding tax exemption on dividends declared by high/new technology enterprises.

The bar to obtain new/high technology status has been set high however. Among the criteria is ownership of core proprietary intellectual property. While many MNCs are likely to balk at transferring IP rights to their Chinese subsidiaries, it is still hard to get a clear and concise meaning for “core.” As no legal definition has been provided as of yet, “core” could simply refer to economic ownership, as opposed to complete legal ownership of intellectual property. Regardless, companies will need to reassess their IP model if they want to qualify for the new incentives. (more…)

Full post as published by China Briefing Blog on December 14, 2007 (boomark / email).