The State Department recently issued “Notice on Implementation of the Transition Preferential Policy on Business Income Tax”. The Notice clearly clarifies the transition method that enterprises primary enjoyed 30 items of preferential policies on business income and at the same time confirms the continuing of the preferential tax policy on western exploitation. The Notice will be put in force from Jan. 1st, 2008.
The Notice prescribes that preferential policy for enterprises which were established after registering in business administration departments before Mar. 16th, 2007 according to former tax laws, administrative regulations and documents with effect of regulations should go through transition in accordance with the following method:
From Jan. 1st, 2008, enterprises that enjoyed former preferential low tax rate, should gradually transit to legal tax rate in 5 years after the implementation of the new tax law. Among them, enterprises that previously enjoyed 15% business income tax rate should become 18% in 2008, 20% in 2009, 22% in 2010, 24% in 2011 and 25% in 2012. Enterprises that primarily enjoyed 24% should become 25% from the year of 2008.
From Jan. 1st, 2008, after the implementation of new tax law, the enterprises that formerly enjoyed periodically preferential policy of reducing taxes could continue to enjoy the preferential methods and time limit according to the former tax laws, administrative regulations and relating documents during period of validity. But if enterprises have not enjoyed the preferential policy because of no profit, the preferential time limit should start from the year of 2008.
The items and scope of implementing transiting preferential policy should be carried out in accordance with “List Implementation of the Transition Preferential Policy on Business Income Tax”. The list enumerates in detail 30 items of preferential policies on business income in transition. It covers former preferential policies on business income tax for foreign investment enterprises, high-tech enterprises and enterprises that located in some special regions like Hainan Island. █ |