THE State Council on Wednesday passed a draft of regulations aimed at helping to enforce the country’s new corporate income tax law.

It was necessary to draw up the regulations to ensure the implementation of the new law, which will come into effect Jan. 1, said a State Council executive meeting presided over by Premier Wen Jiabao.

According to the draft, the income tax rate for foreign companies in special bonded zones, which previously enjoyed a preferential rate of 15 percent, will rise in stages over five years to 18 percent, 20 percent, 22 percent, 24 percent and finally 25 percent, the same as domestic companies.

It will be the first time since 1978 that China has put domestic and foreign firms on an equal income tax footing in an effort to promote fair competition.

The arrangement would apply to such bonded zones as the Shenzhen Special Economic Zone, economic development zones set up in coastal cities such as the Hongqiao Economic and Technological Development Zone in Shanghai, and high-tech development zones including Zhongguancun Science Park in Beijing.

However, foreign companies that have tax holidays, which provide five tax-free years and another five years of up to 50 percent reduction, will retain those concessions for the full 10 years before facing the new higher rates.

The 15-percent rate will be retained until 2010 for foreign companies that invest in the central and western regions of China, an apparent effort by the government to redress regional economic imbalances.

The regulations will include new criteria for high-tech firms, which can enjoy a lower 15-percent rate.

The qualifications could include the ownership of core proprietary property rights or government-supported products.

The regulations will also specify the proportion of sales that must be devoted to research and development and the ratio of research employees among total staff for qualified high-tech firms.

The changes will make it more difficult for companies to gain the status of high-tech investors, said experts.

The regulations also state in detail tax policies that will favor infrastructure projects, environmental protection, and energy and water conservation.

(Xinhua)