China Reins in Shell Companies to Limit Harmful Tax Competition

China has restricted shell companies’ access to tax incentives in eight regions of the country in 2025, according to a report released by its tax administration Monday.

The State Taxation Administration, along with China’s finance and market supervision departments, worked to ensure companies that enjoyed regional tax incentives contributed to their local economies and limited them from “fraudulently enjoying preferential policies,” the tax department wrote.

The effort forms part of the country’s initiative to break down regional trade barriers and harmonize market regulations. Shell companies, according to China, are enterprises registered in zones where they can claim tax ...