Fundamental Enterprise Income Tax Reform in China: Motivations and Major Changes

33 Pages Posted: 17 Nov 2007  

Jinyan Li

York University - Osgoode Hall Law School

Date Written: November 15, 2007

Abstract

On 16 March 2007, the National People's Congress of China promulgated a new Enterprise Income Tax Law (EIT Law) to take effect on 1 January 2008. It is the first law in Chinese history that imposes an income tax on all forms of enterprise. It replaces the current FIE Income Tax Law applicable to enterprises with foreign direct investment and the Interim Enterprise Income Tax Regulations (Interim EIT Regulations) applicable to Chinese-owned enterprises. Most notably, the EIT Law abolishes the tax incentives applicable only to foreign-investment enterprises (FIEs) and introduces a general tax rate that is internationally competitive. The promulgation of the EIT Law symbolizes the maturity of China's tax policy, China's commitment to the principles of the World Trade Organization (WTO) and China's confidence in its economic development policy. This article provides some background on this fundamental tax reform and an overview of the key changes and their implications.

Keywords: Enterprise Income Tax Law, China, Enterprise, Tax Policy, World Trade Organization

JEL Classification: K33, K34

Suggested Citation

Li, Jinyan, Fundamental Enterprise Income Tax Reform in China: Motivations and Major Changes (November 15, 2007). CLPE Research Paper No. 33/2007. Available at SSRN: https://ssrn.com/abstract=1030656 or http://dx.doi.org/10.2139/ssrn.1030656

Jinyan Li (Contact Author)

York University - Osgoode Hall Law School ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
Canada
416-736-5025 (Phone)

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