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China remains favored investment destination for foreign firms

12-02-2010 09:04 BJT

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From today, foreign-funded companies will no longer be exempt from municipal maintenance and construction taxes. It marks the end of a preferential treatment period for foreign companies in the country. Guan Xin takes a closer look at the impact of the policy.

More taxes to pay for foreign companies operating in China.

The country will begin collecting city maintenance and construction taxes, and education-supporting taxes from previously-exempt foreign companies.

For a foreign company operating in municipalities like Beijing, if they used to pay 10 million RMB yuan in tax, now they have to pay one million yuan additional tax, which is 10 percent based on original tax amount. The latest change marks an overall equal treatment for foreign enterprises with domestic ones in China.

It's a minor adjustment compared to a major tax reform in 2008, when China unified income tax rates for both domestic and foreign-funded companies at 25 percent. That's compared to the previous rate of 33 percent for domestic firms, and 15 percent for foreign firms. Still, China remains a favored investment destination for foreign businesses. Market opportunity in China is still a major consideration.

Mark Foster, Group Chief Executive of Accenture said "I think in term of places in the world where people will want to invest, and where investment will take place, China I think will top most people's lists for a long time to come. Consumers are here, and the rising middle class is here."

Although most foreign companies agree it's fair to be taxed equally with domestic players, they're also hoping to enjoy a level playing field on issues like intellectual property rights, and market access to some certain sectors.

Professor Patrick Chovanec, Tsinghua University said "I think it's important to realize that tax is only a small part of a level playing field. By all means, treat foreign enterprises the same with local enterprises when it comes to taxes, but also treat them the same when it comes to intellectual property rights protection, market access, other things like that. So have a level playing field overall."

Meanwhile, foreign investment in China keeps climbing. Figures from the Ministry of Commerce show foreign direct investment flowing into China increased 7.9 percent year-on-year in October, rising for the 15th consecutive month.

Editor:Xiong Qu |Source: CNTV.CN

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