China Enticing Foreigners with New Retroactive Tax Break

on 01/02/2018 - 01:02 pm

In an attempt to “promote the growth of foreign investment, improve the quality of foreign investment and encourage overseas investors to continuously expand their investment in China,” the China's Finance ministry announced last month that it would temporarily exempt foreign companies from paying tax on their earnings.

The exemption is retroactive to Jan. 1, 2017, meaning companies would receive a refund on taxes paid in 2017.

To be eligible, the Ministry stated, foreign companies must invest those earnings in sectors encouraged by China’s government — including railways, mining, technology and agriculture.

Some are speculating that this new exemption is in response to the recent tax reform in the U.S. According to a recent New York Times article, "While Thursday’s announcement did not explicitly refer to the tax overhaul in the United States, analysts have said that it is almost certain that the policy was in response to it."

Jake Parker, vice president for China operations at the U.S.-China Business Council; however, said some of his member companies had already said that they would seek to repatriate China earnings to the United States with the tax code change, and were considering doing so quickly to minimize the risk of being subject to capital controls.

The above are just a few exerpts from the New York Times article entitled "China Offers Tax Incentives to Persuade U.S. Companies to Stay". Click here for the full story.


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