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The dual corporate income tax in China: the impact of unification

van der Hoek, M. Peter and Kong, Shuhong and Li, Zhenzi (2008): The dual corporate income tax in China: the impact of unification. Published in: Public Finance and Management , Vol. 8, No. 4 (2008): pp. 655-677.

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Abstract

For many years, foreign funded companies in China enjoyed a relatively low tax rate and a series of preferential policies which were aimed at encouraging foreign direct investment in China. By adopting a new law in 2007, however, the National People's Congress proclaimed the end of the dual corporate-income-tax system. From 2008, the preferential tax treatment of foreign capital will be phased out. As a result, the income tax rate for domestic and foreign funded companies will be unified at the rate of 25%. This paper explores the impact of the dual corporate income tax system on both domestic and foreign funded enterprises and discusses the possible effects of the unification.

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