18 February 2008 | Paul Snell
China's move to a standard rate of corporation tax at the start of this year could boost the country's hi-tech and environmental sectors.
According to accountants Grant Thornton, the move to a unified level of tax across the country will increase bills for foreign firms, but incentives will be passed to other industries.
On the 1 January China introduced a flat rate of corporation tax of 25 per cent across the country. Previously rates varied between 15 and 33 per cent. International firms will now pay the same rate as domestic companies (News, 29 March 2007).
Stephen Weatherseed, head of the Grant Thornton UK China Group, said in a statement: "Incentives previously aimed at encouraging foreign investment are now being pushed toward hi-tech and environmentally friendly companies with measures including generous tax breaks for research and development and environmental spending."
But while the cost of doing business in the country will rise, the low-cost nation will remain a popular choice for buyers.
"China is and will remain a huge market, and UK companies are continuing to invest heavily," said Nick Farr, tax partner at Grant Thornton. "A growing challenge now for international companies will be competing against ever more confident domestic Chinese players."