The impact of new income tax law on foreign invested enterprises in China

Lai Sheung, Suwina CHENG, Shanshan SHI

Research output: Journal PublicationsJournal Article (refereed)peer-review


China enforced the new Enterprise Income Tax Law and the Implementing Rules of the Enterprise Income Tax Law (New Income Tax Law) on Jan 1, 2008. Under the New Income Tax Law, all foreign investment enterprises (FIE) have the same tax obligations as domestic enterprises (DE) in China: The change in reporting regime indicates that China's tax system is moving toward a more mature and systematic phase. While the New Income Tax Law substantially increased the tax burden on FIEs by 10%, it concurrently reduced the income tax rate for DEs by eight percent. This inevitably had a considerable effect on foreign investors: they not only faced a significantly uplifted tax rate, but such a policy also increased global competition in the domestic market. The aim of this article is to examine the changes in the New Income Tax Law and its effects on and opportunities for foreign investors.
Original languageEnglish
Pages (from-to)17-24
Number of pages8
JournalInternational Tax Journal
Issue number1
Publication statusPublished - 1 Feb 2012


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