Landmark Investment Laws In China

March 28, 2007
New enterprise income tax law and new property law.

The Organization of Economic Cooperation and Development on March 28 welcomed two new Chinese laws as a step forward in promoting a more transparent investment climate. The Enterprise Income Tax Law would erase preferential rates enjoyed by foreign companies, while the Property Law would provide new protection for the private sector, the OECD said.

"(The Enterprise Income Tax Law) ends the uncertainty that has surrounded this policy since China's accession to the World Trade Organization at the end of 2001," the OECD said. The 30-member club of industrialized nations said it had previously warned China against excessive reliance on lower taxes and other special incentives to attract investment as a substitute for establishing a broad enabling environment for investment.

"(The Property Law) enshrines in law, and reportedly elaborates in detail, the landmark change to China's state constitution in 2004 to include protection of private property," it said. "This is a welcome step forward in establishing a firm basis for the protection of investors, both domestic and foreign."

But it warned that cases might emerge where investors had acquired land or other assets from local governments that were later found to have taken it over illegally, creating uncertainty for the companies concerned. "We are confident that the Chinese government will put in place measures to deal with these and similar issues," the OECD said.

Copyright Agence France-Presse, 2007

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