Change on the Horizon: The Future of Corporate Tax Reform

By Lawrence Sussman and Chai Lu, Coudert Brothers, Beijing

China's tax laws have been a cornerstone of the country's open door policy for the past 20 years, as they have reflected flexibility in administration, open-mindedness toward amendment and a predilection towards transparency that has encouraged foreign trade and investment. With China's accession to the World Trade Organization (WTO), many of China's existing tax laws must be amended to conform to the requirements of the WTO agreements. However, this does not mean that all tax law-related reforms will be WTO driven. Rather, overall structural reform of China's tax system is necessitated by the fact that its economy has evolved dramatically over the past ten years. Most of the tax reforms now taking place have been long in the works, and were designed to take place even without WTO accession. WTO accession, however, offers an excellent opportunity for China to launch such reforms. One of the most significant changes currently in the pipeline is the reform of the enterprise income tax system. The focal point of this reform is the forthcoming Unified Enterprise Income Tax Law, which will finally merge the currently separate tax policies for domestic and foreign enterprises.

Background to Reform