Friday 8 February 2013

China ends preferential tax policy for foreigners

By Wang Changyong
BEIJING ( Caixin Online ) — China will terminate a preferential policy on expatriates’ tax payments for income from dividends, as part of tax reforms included in the newly released blueprint to curb the widening wealth gap.
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Foreign individuals have been exempted from a 20% tax on their incomes from equity dividends in foreign-funded companies, a policy started in 1994 to encourage foreign investment in China.
Liu Tianyong, director of the Beijing law firm Hwuason Lawyers, said the preferential treatment was outdated and need to be revised.
“It is unwise to continue a preferential offer because some foreign-registered investors have started to transfer their profits out of the country,” he said.
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Liu also expected the revision would help authorities to crack down cross-border tax evasion.
According to legal procedures, the Ministry of Finance and State Administration of Taxation will revise related laws in accordance with the State Council’s guideline.
On Jan. 5, the State Council, China’s version of a cabinet, approved a guideline with 35 measures designed to balance the country’s system of distributing wealth to narrow the gap between urban elites and the rural poor.
The guideline includes a slew of adjustments to the country’s tax system.
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