Wednesday, December 31, 2008

Foreign banks ask for delay of interest tax on overseas loans

A group of 36 foreign banks led by Citibank (China) has filed a petition to the Chinese government for postponing a new tax on interest levied on money borrowed from overseas, sources reported.

The move was said to affect the foreign banks' mainland operations amid the ongoing global financial crisis and economic recession.

China started to levy a 10% withholding tax from Jan. 1 on interest payments on all loans to banks in China from overseas lenders.

The foreign banks in the petition have urged the government to allow them only pay the tax on interest payments that occurred after Dec. 4, according to the report.

Accounting firm Ernst & Young estimated the measure, along with recent changes to the banks' business tax, would cost the banking sector an extra RMB 1 billion in tax bills.

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