30 March 2015
China Expands Income Tax Breaks for Small Low-Profit Enterprises
The Ministry of Finance and the State Administration of Taxation recently issued a circular saying that the State Council has given the green light to the expansion of enterprise income tax breaks for small low-profit enterprises.
The circular states that small low-profit enterprises with annual taxable income not exceeding Rmb200,000 will only have to pay enterprise income tax at the reduced rate of 20% on 50% of their taxable income from 1 January 2015 to 31 December 2017.
The small low-profit enterprises mentioned in the circular refer to small low-profit enterprises that conform to the Enterprise Income Tax Law and its implementation rules.
The Enterprise Income Tax Law and its implementation rules clearly specify that small low-profit enterprises refer to enterprises that are engaged in industries not restricted or prohibited by the state and that meet the following conditions:
Industrial enterprises: Enterprises that have an annual taxable income not exceeding Rmb300,000, have no more than 100 employees and have total assets worth no more than Rmb30 million.
Other enterprises: Enterprises that have an annual taxable income not exceeding Rmb300,000, have no more than 80 employees, and have total assets worth no more than Rmb10 million.
According to the circular, the number of employees mentioned in the Implementation Rules of the Enterprise Income Tax Law includes the number of employees who have established labour relations with the enterprises as well as the number of dispatched workers accepted. The indexes for the number of employees and total assets shall be determined according to the quarterly average for the whole year.
The circular also stresses that financial and taxation departments at all levels must work closely together to strictly implement the income tax concessions for small low-profit enterprises in accordance with the relevant regulations. At the same time, they must also keep track of and understand the implementation of the tax break policies, promptly reflect the new problems discovered and ensure that the policies are in place.