Final draft enterprise income tax rules submitted
Updated: 2007-11-15 11:37
The final draft of the implementation rules of the Enterprise Income Tax Law of China says preferential treatments for special regions enjoying tax exemptions and reductions will be abolished step by step over the next five years, said experts.
According to the draft rules, the 15 percent preferential tax rate for special economic zones, economic and technological development zones, and high-tech development zones will be raised to 18, 20, 22, 24, and 25 respectively over the next five years.
Costal economic development zones will need to pay a 25 percent tax in 2008, up from 24 percent. The central and western regions will continue enjoying the 15-percent tax rate through 2010.
The draft rules say high-tech enterprises are allowed to pay a preferential 15-percent tax when they meet a few qualifications. They first must own the core intellectual property, and their products must belong to the key State-supported high-tech fields. Their research and development expenses have to be a certain proportion of their sales income, and income from high-tech products should account for a certain share of the total. The authorities will reassess the eligible enterprises every one or two years.
According to the rules, income from national debt interest and resident enterprises' equity investment returns such as dividends will be exempt from tax. For non-resident enterprises, the tax rate will be reduced to 10 percent on income from dividends, interests, rents, and royalty fees. The tax on small low-profit companies will be levied at a reduced rate of 20 percent.
Venture capital enterprises investing in non-listed medium- and small-sized high-tech enterprises for more than two years may deduct up to 70 percent of the amount invested from taxable income.
The draft either exempts or reduces income tax on investment in agriculture, forestry, animal husbandry, and fisheries. It also exempts tax on enterprises investing in infrastructure construction, environment protection, and energy and water conservation in their first three years of operation, and reduce the tax by half from four to six years. Income from technology transfers of less than five million yuan (US$672,630) is tax free, and the tax rate on excess will be reduced by half.
The draft taxes 90 percent of the income on enterprises making comprehensive use of resources.
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