New law to snare tax havens
1 June 2007
Investment banks, foreign financial institutions and companies using the British Virgin Islands and other tax havens to
invest in China may need to review their operations to avoid being
taxed on their worldwide income under a new unified enterprise income tax law, effective January 1, 2008, the Wall Street Journal reported. Any company making operational decisions or effectively managing operations in the country could
potentially be classified as a tax resident even if the company is not
incorporated in China, Deloitte and Touche said. The law is part of Chinese tax reform that includes
aligning tax rates for foreign companies with rates for domestic companies, and bringing Chinese tax
laws in line with international standards.