Corporate income taxes and turnover taxes paid by "non-citizen" firms in China rose 40.7 percent year on year to 22.2 billion yuan (US$3.3 billion) in the first half of the year, the State Administration of Taxation (SAT) said Friday.

"Non-citizen" companies, in China, are different from foreign-funded firms. They are defined as those established outside China under laws of countries other than the Chinese mainland, but obtaining profits inside China.

The rise is in contrast to a fall in China's overall tax revenue. In the first half, revenue fell six percent from a year ago to 2.95 trillion yuan, while corporate income taxes dropped 13.8 percent.

The administration attributed the increase in tax during six consecutive months mainly to increased returns from non-citizen firms.

The returns included expanded coverage of turnover taxes since January 1 because of a new regulation, and the establishment of declaration systems and regulations.

Also, some preferential tax policies for non-citizen firms were cancelled last year, which increased tax revenues from dividends, bonuses, and asset transfer earnings non-citizen firms earned.

The administration has asked Chinese firms, on its behalf, to collect a 10-percent tax when paying annual dividends to non-citizen firms.

Of the 22.2 billion yuan collected from the firms, 19.45 billion yuan was in corporate income tax paid by non-citizen firms, up 50.07 percent from a year ago.

The majority, or 15.16 billion yuan, of the corporate income tax came from provincial regions such as Jiangsu, Beijing, Tianjin, Shanghai, and Guangdong.

(China Daily August 1, 2009)