China Tax reform means foreign and local companies equal

China's finance minister has introduced a new corporate tax law. China's tax rate for all companies will now be a standard 25 per cent, bringing to an end different rates for foreign and domestic companies.

The Chinese government believes its time to treat all companies operating in China the same when it comes to tax.

Anthony Klein International Tax specialist with Price Waterhouse Coopers says it represents the most fundamental and important change to the tax rules in a decade.

KLEIN: And they change the whole framework upon which both foreign companies and also domestic companies are being taxed in China.

SNOWDON: In bald terms the changes mean foreign companies that previously paid only 15 per cent tax will now pay 25 per cent.

And domestic companies which paid a higher rate of 33 per cent will see their tax rate reduced to the same 25 per cent. Copyright Australian Broadcasting Corporation

Zero tax holidays of several years to attract foreign investors will come to an end. And that's not all.

KLEIN: Well, there various and numerous, but China in past has had a very liberal system in terms of giving tax concessions to foreign multi-national investors and we're going to see significant ratification of those changes going forward. But the third one I think that may attract people's attention in Australia is the possibility of a reintroduction of withholding tax in China on dividends that are paid by Chinese companies to their foreign investors.