The Impact Of Foreign-funded Enterprises Operating In China, The Two Taxes Combined

Since the early 1990s, China has maintained a dual income tax system for foreign invested enterprises ("FIEs") and domestic enterprises. Preferential tax treatment like lower tax rates, tax deductions and tax holidays offered to FIEs was designed to attract foreign investments to China .Howerver, as the《The Law of the People's Republic of China on Enterprise Income Tax》took effect Jan, 1 2008.which unifies the income tax levied on domestic and foreign enterprises to create a level playing field for all. The New Law will introduce a single tax rate of 25%, replacing the existing two-system tax, which has substantially different effective tax rates for domestic companies and Foreign Investment Enterprises ("FIEs") due principally to different incentives available as well as different limitation on cost deduction. And the preferential tax treatment to FIEs come to an endThe benefit that the new income tax law takes to domestic enterprises is obvious, but how is effect on FIEs ? the article will show you the necessity of new income tax law,the main change from the old tax law to new one,the impact on FIEs and how do the FIEs plan and operate their enterprises' manufacture, operation, investment, finance, organization structure and the like economic work or behavioral tax matters in advance in order to achieve the enterprises' overall tax burden optimization and maximum value.