State Council, Circular on the Implementation of Transitional Preferential Enterprise Income Tax Policies

Issued: December 26 2007

Main Contents: Beginning from January 1 2008, enterprises that were previously subject to the preferential policy of low tax rates shall undergo a gradual transition to the statutory tax rate within five years after the implementation of the PRC Enterprise Income Tax Law (New Tax Law). The applicable tax rates for the next five years for enterprises that were previously subject to a 15% tax rate shall be as follows:

Where an enterprise was previously subject to a tax rate of 24%, it shall pay tax at a rate of 25% starting from year 2008.

Beginning from January 1 2008, enterprises that were previously entitled to regular preferential treatment of enterprise income tax reduction or exemption such as "two years of tax exemption followed by three years of 50% tax reduction" and "five years of tax exemption followed by five years of 50% tax reduction" shall, after the implementation of the New Tax Law, continue to enjoy such treatment, according to the procedures and term for the preferential treatment as stipulated in the original tax laws, administrative regulations and relevant documents, until the expiry of the term. If the enterprise has not been profitable and thus not yet entitled to the preferential tax treatment, the term of preferential treatment shall be calculated from year 2008 (Article 1).