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Beijing, Jan. 3 (PTI): After emerging as the “world's factory”, China has withdrawn investor-friendly sops and policies it offered since 1970s to woo Fortune 500 companies to set up manufacturing bases in the booming nation.
Beginning January 1, joint ventures and wholly foreign-owned firms will no longer be exempt from paying land-use tax. Also, later this year a new corporate income tax structure is expected to be implemented that will see foreign and domestic firms taxed at the same rate, ending years of special corporate tax breaks for overseas firms.
The land-use or property tax rate will now apply equally to both local and foreign developers and will triple the old rate which was set in 1988.
In large cities the annual property tax rate will range from 1.5 yuan to 30 yuan (local currency) per square meter depending on its location and type of use. In medium sized cities the rate will range from 1.2 yuan to 24 yuan per square meter, in small cities the rate will vary from 0.9 to 18 yuan and counties, townships and mining areas property will be taxed at a rate of between 0.6 yuan to 12 yuan per square meter per year.
This first revision of land-use tax regulations since 1988 is aimed at bringing better control and better planning to the development and re-development of land, Xinhua news agency quoted Chinese cabinet sources as saying.
The new regulations will also bring to an end the unfair treatment of domestic companies which have had to pay taxes and fees from which overseas firms have been exempted from for nearly two decades, they said.
The state council will begin on July 1st a three-year programme to develop a comprehensive land-use registry which will involve surveying every parcel of land and classify its use to protect agricultural lands and allow for more coherent development on land zoned for industrial, commercial or residential use.
Low land use costs and tax exemptions have been the major tools China has used to open its economy to foreign investment since the late 1970s.
In late December, China’s top legislature began discussing a new law on corporate income tax that is likely to result in a unified tax rate of 25 per cent for both domestic and foreign companies. If the law is approved, foreign firms are likely to lose a major tax advantage.
Despite a stated corporate tax rate of 33 per cent, foreign firms often benefit from tax waivers, credits and incentives offered by provincial governments that bring their tax rate down to an average of 15 per cent. At the same time, domestic companies on average are taxed at a rate of 24 per cent.