Since the advent of foreign direct investment in the late 1970s, China has had two distinct tax regimes, one for foreigner-invested enterprises (FIEs) and the other for domestic enterprises.
On paper, FIEs have had a better deal from the tax system, paying tax at a rate roughly half that of domestic companies and enjoying substantial holidays before tax is even payable. Even more attractive incentive packages have been on offer to FIEs established in the five Special Economic Zones (SEZs)and 49 other development zones created by regulation, most of which are in the fast-growing coastal regions.
