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Category: Money

Foreign Businesses in China Gets Expensive

Written on December 02, 2010 by Japhet Writ

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China puts an end to foreign businesses' special treatment when it comes to maintenance, construction and education taxes. As the levy gets a hike, should foreigners be bothered with it?

started to increase its for the by removing their exemption to maintenance, construction and education levies. Last October 18, the ’s State Council announced that it will unify the City Maintenance and Construction Tax and the Education Surcharge for domestic enterprises, foreign invested businesses and foreign individuals. The policy change will bring tax rates for foreign companies in line for domestic establishments. The Chinese State Media claims that it marks the end of special treatment for foreign businesses.

While the tax increase will not drive the foreigners away, the growing operational costs combined with political danger in China will pose major challenges to foreign establishments in the coming days. The maintenance, construction and education taxes will be calculated based on the current levy that companies, organizations and individuals pay for turnover sales. And albeit the hike arrived suddenly, it is no longer a surprise that it follows under way for several years in China.

The unification of domestic and foreign tax rates in the country is meant to simplify the tax code, remove the long-held privileges for foreign firms and boost domestic businesses. But needless to say, foreign invested business and foreigners living in China are not eager to pay any new tax. As of the moment, the greatest concerns of foreign companies are the Communist Party’s policies, the increasing risk of protectionism and preferential procedures for domestic firms, forced technology transfers, ineffective enforcement of intellectual property rights, and massive corruption.

However, these complaints only make up the minority while the rest views enough profitability in China. Still, challenges for are not yet visible, as they are most likely to emerge in the coming years.

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