The adjustment of income tax should be the largest one of foreign capital utilization policy in2007. The new Law on Enterprise Income Tax and the related implementation regulation officially took effect on Jan.1 this year. With reference of international practice and by observing the rule of fair competition market, the new tax law has reflected “Four Ones”: one applicable enterprise income tax law for both local and foreign-invested enterprises; one lowered enterprise income tax rate; one standard for deduction approach before tax; one preferable tax policy to execute new preferable tax system with “main preference on industry and less preference on area”.

After the new tax law was implemented, enterprises in such industries as high technology, infrastructure, agriculture, forestry, livestock, environmental protection and safety production will enjoy new tax preference. Small sized and less profitable enterprises will also enjoy 20% preferable tax rate. The new tax law has retained preferable policy on partly tax collection in western area and special economic area in order to promote balanced economic development from area to area. The tax rate of service enterprise has dropped from original 33% to 25%, largely lowered tax burden of enterprises in service industry. Moreover, the State Council has issued notification on how to implement the preferable policy on enterprise income tax to assist enterprises to realize stable transition.