PFM Articles 
The Dual Corporate Income Tax in China: The Impact of Unification
SHUHONG KONG, ZHENZI LI AND M. PETER VAN DER HOEK
PFM, Vol. 8 No. 4,
(2008)
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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