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China Announces Big Tax Cuts for Small Businesses

As part of a raft of measures designed to nurture smaller business operations following the 9 January executive meeting of the State Council, the Ministry of Finance and the State Administration of Taxation jointly announced in a recent circular that:

  • Any business with a monthly revenue of RMB100,000 or below will no longer be obliged to pay value-added tax (VAT).
  • For businesses with annual income of RMB1 million (or less), they will pay enterprise income tax at a rate of 20% on 25% of their total revenue. For businesses with annual income of between RMB1 million and RMB3 million, they will pay enterprise income tax at a rate of 20% on 50% of their total revenue.
    (For the purpose of these incentive measures, a small and low-profit enterprise is to be defined as any business active in a non-restricted sector that meets the following three criteria: (i) annual taxable income of RMB3 million or below, (ii) employs a maximum of 300 people, and (iii) has total assets of RMB50 million or less.)
  • Based on their understanding of the prevailing regional conditions and requirements, local government bodies are to be given the discretion to offer small businesses 50% exemptions from the following charges: Resource Tax, Urban Maintenance and Construction Tax, Property Tax, Urban Land Use Tax, Stamp Duty (excluding Stamp Duty on securities trading) and Farmland Occupation Tax, as well as on certain educational surcharges. Any business already enjoying a preferential rate with regard to the designated charges may seek a further concurrent reduction under the terms of this new legislation

The above regime came retrospectively into force as of 1 January this year and will remain in effect until 31 December 2021.

For further details, please access the following links:

Circular Concerning the Implementation of the Inclusive Tax Reduction and Exemption Policy for Small and Low-Profit Enterprises (Cai Shui No. 13 [2019]) (in Chinese)

China Announces Tax Concessions for Small and Micro-Businesses

Content provided by Picture: HKTDC Research
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