Question : When will the PRC Enterprise Income Tax Law (the EIT Law) come into force?

Answer :

The EIT Law will come into force on 1st January 2008.

Question : What is the implication of the change in tax rules?

Answer :

The scope of tax net will be larger than before. The impact of the change in the EIT Law will affect foreign enterprises either that have registered a fixed place of business in China, or that have not officially registered but effectively maintained a place of business in China. Previously these types of taxpayer are only subject to tax on PRC-source income. Under the new EIT Law if the management and control is located in China, the foreign enterprise will be liable to tax on worldwide income. One example of this is the representative office that carries out management and control over business activities across border. Most of these representative offices are set up by Hong Kong companies to take advantage of lower labor and land costs

Other FAQs:

1. Is there any change in the scope of income tax?

2. What specific measures will be taken in this tax reform for the development of the small and medium size enterprise?

3. What major significance does the reform of VAT transformation will have on the perfection of the VAT system?

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