CHINA will end preferential tax rates for foreign companies in 2007.

Foreign companies already operating in China may be able to apply for a grace period as long as five years to ease the transition.

The average domestic company pays taxes today at a 33%, rate while the average foreign company is taxed at only a 15% rate. The unified rate has not been announced yet, but there is speculation it could be around 25%. State-run media announced in late May that the government has decided to end preferential treatment for foreign companies at the beginning of 2007. Other details have not been released.