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Business Tax for Foreign Service Suppliers April 2009 From 1.1.2009 there is a significant change regarding China's business tax laws. In general business tax is imposed on provision of services and transfer of intangibles and immovable property. Previously, before 2009, the tax was imposed on a territorial basis, namely ,only services provided in China territory were liable to business tax . From 1.1.2009 services are liable to the tax if either the supplier or the customer are located in China .e.g. design services supplied outside China to a Chinese company are now liable to the tax. Foreign companies supplying services to China, even when not having a business establishment in China ,must appoint a withholding agent in China, generally their business agent or their customer, to ensure payment of the business tax. The new amendment has a significant impact on foreign service suppliers. China New Corporate Tax Rate January 2008 From 1.1.2008 China's new corporate tax rate is 25%. The new corporate tax rate applies to both domestic and foreign companies. The new tax rate replaces the previous tax rate of 33%. Foreign companies which set up activities before 2008 can enjoy, for a limited period, the previous 15% tax rate or tax holiday. China V.A.T Refund for Exporters Reduction/Abolition SEPTEMBER 2007 According to a circular by the Chinese ministry of finance and the administration of taxation, effective from 1.7.2007 there is a major reduction of export VAT for 2,268 products. For other 553 products , especially high energy consuming or polluting, the VAT export tax refund paid on inputs (previously 5%-13%) would be abolished.It is expected that the export of these products would be subject to output VAT. For 10 other products, including oil paintings etc. the VAT export refund was abolished.The export of these items is still VAT exempt. China New Unified Corporate Tax MARCH 2007 The national people's congress approved in March 2007 a proposal unifying China's corporate tax at a rate of 25% for foreign and domestic companies alike. The proposal meets China's commitment to the world trade organisation, WTO. At present domestic companies pay a corporate tax of 33%, while foreign companies usually pay 15% or 24% tax, paid after a tax exemption in the first 2 years, and half of these rates in the next 3 years. The proposed new tax rate is expected to attract tradional domestic companies, especially small and medium sized companies,wishing to establish a new wholly owned Chinese company. The new law is expected to be effective from 1.1.2008. China Income Tax JANUARY 2006 From 1.1.2006 the monthly exemption on income from salary is CNY 1,600 for a Chinese resident(previously-CNY 800), and CNY 4,800 for a foreign resident(previously-CNY 4,000). From 1.1.2006 any payer of any taxable income to individuals must deduct tax at source and provide the taxpayer's details to the Chinese tax authorities, who would create a taxpayer file and cross check his data. Income Tax, Dividends JUNE 2005 The Chinese Finance Ministry issued a new notice, reducing individual's dividend income tax from domestic listed shares. The new tax rate is still 20%, but only on 50% of the dividend income.

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