China widens income tax exemption for foreign investors

FILE PHOTO: A China yuan note is seen in this illustration photo May 31, 2017. REUTERS/Thomas White/Illustration/File Photo

BEIJING (Reuters) - China has widened income tax exemption on re-invested profits for foreign firms, the finance ministry said on Sunday, to try to boost foreign investment amid trade tensions.

The ministry said last December it would temporarily exempt foreign firms from paying provisional income tax on profits they re-invest in the country. But such policies only covered investment into sectors encouraged by the Chinese government.

The scope of the tax exemption has been expanded to all sectors where foreign investment is not prohibited, the finance ministry said in a statement.

The move will help “further encourage foreign investment in China”, the finance ministry said on its website.

The tax exemption expansion is retroactive from Jan. 1 this year, which means firms that have paid taxes this year will be refunded.

China’s standard corporate tax rate is 25 percent although

it gives firms more leeway to make profit deductions when they

make charitable donations.

The government has taken steps to attract foreign investment, as part of policy steps to support the slowing economy amid rising trade tensions with the United States.

Reporting by Kevin Yao