While this exemption was available to foreign firms earlier, it focused on only on specific sectors. With this strategic move, Beijing has covered all sectors, other than the prohibited ones, and to top it has made the provision applicable retrospectively from January 1, 2018.

As a measure to mitigate issues stemming from an escalating trade war with the United States, Beijing’s ministry of finance said, it has widened income tax exemptions on re-invested profits for foreign firms.

The move is aimed at boosting foreign investment in the country.

Although in December 2017, China’s finance ministry stated, it would temporarily exempt foreign firms from paying provisional income tax on profits they re-invest in the country, it covered only specific sectors which the government wanted to more investment in.

With the widening of tax exemptions, the measure has been expanded to cover all sectors where foreign investment is not prohibited, said China’s finance ministry in a statement.

The tax exemption expansion is retroactive from January 1, 2018. This means, that firms that have already paid their taxes will be reimbursed.

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