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(Jan 02, 2008) The Standing Committee of China's National People's Congress adopted a decision to amend the Law on Individual Income Tax on December 29, 2007 (Quanguo Renmin Daibiao Dahui Changwu Weiyuanhui guanyu xiugai Zhonghua Renmin Gongheguo Geren suode shui fa de jueding, National People's Congress of the People's Republic of China Web site, Dec. 29, 2007). The revision of article 6, paragraph 1, item 1, raises the tax threshold to 2,000 yuan (about US$275) a month from the previous 1,600 (about US$220). In 2006, the threshold had been raised from 800 yuan a month to the 1,600-yuan level. The aim of setting the resulting tax cut, according to China's official news service, Xinhua, is "to ease the burden of medium- and low-income earners facing higher living costs." To the same end, on August 15, 2007, the government reduced the tax rate on interest income from 20 percent to 5. (More on PRC's Top Legislature Adopts Amendment to Raise Income Tax Threshold, XINHUA, Dec. 29, 2007, Open Source Center No. CPP20071229968243.) The decision enters into force on March 1, 2008.
In addition, on January 1, 2008, China's new unified (domestic and foreign-funded) Corporate Income Tax Law took effect. It will impose as of 2012 a universal tax rate of 25 percent in place of the current 33-percent rate for domestic firms and 15-percent rate for foreign firms. For the latter, the tax rate will jump to 18 percent in 2008 and then increase by two percentage points annually in 2009, 2010, and 2011 to reach 25 percent in 2012. (China Focus: China Publicizes Policies to Cushion Impact of New Corporate Income Tax Law, XINHUA, Dec. 30, 2007, Open Source Center No. CPP20071230968084; Denise Tsang, Beijing Increases Tax on Foreign Firms to 18pc, SOUTH CHINA MORNING POST, Dec. 31, 2007, Open Source Center No. CPP20071231721001.) One tax analyst commented: "[t]he new rate will begin at a harsher than expected level, and will jump to 25 per cent within four years instead of five years, which will increase costs and make the livelihoods of Hong Kong manufacturers even more difficult." Furthermore, it reflects "China's strong push into hi-tech development and the manufacturing of higher value goods" (Tsang, id.). (See also 12 W.L.B. 2007.)
|Author:||Wendy Zeldin More by this author|
|Topic:||Taxation More on this topic|
|Jurisdiction:||China More about this jurisdiction|
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Last updated: 01/02/2008