3 Dec 2015
Innovative, Small Businesses Save Rmb237 Billion in Taxes in First Nine Months
As announced by the State Administration of Taxation (SAT), China's policy to support innovation and mass entrepreneurship has helped eligible businesses save Rmb237.5 billion in taxes in the first three quarters of 2015.
China has introduced a variety of tax concessions to create a favourable environment for mass entrepreneurship and innovation. These concessions cover the following aspects:
-- Enterprises engaged in the development of new technology, new products and new production techniques are not only entitled to full exemption of R&D costs in their enterprise income tax but are eligible for an extra 50% tax cut. In other words, they may claim deductions of Rmb1.5 million for Rmb1 million spent on R&D. According to SAT statistics, 45,094 enterprises were eligible for this super deduction in 2014 and they were entitled to claim deductions of Rmb237 billion from their pre-tax income, equivalent to Rmb59.25 billion in tax cuts. Based on this estimate, tax cuts in the first three quarters of this year would amount to about Rmb44.4 billion.
-- New and high technology enterprises under special state support enjoy a reduced 15% enterprise income tax rate, 40% less than the standard rate. Software and IC firms and technologically advanced service outsourcing companies are eligible for immediate VAT refund, reduced enterprise income tax rate and other concessions. Tax cuts in support of their innovation would amount to Rmb96.5 billion in the first three quarters of this year.
-- Technology transfer, technology development, technology consultancy and technology services relating to innovation are exempt from VAT. Domestic enterprises engaged in these businesses are also exempt from enterprise income tax if their income does not exceed Rmb5 million in a taxable year, and a 50% reduction for income in excess of this amount. During the first three quarters of this year, tax savings attributed to VAT exemption on technology transfer and commercialisation would amount to Rmb5 billion, and enterprise income tax exemption and remission would amount to Rmb160 million.
-- The annual taxable income of low-profit small businesses eligible for a 50% reduction in enterprise income tax shall be gradually raised from Rmb60,000 to Rmb300,000. The monthly sales revenue that qualifies for temporary exemption of VAT and business tax shall be raised from Rmb20,000 to Rmb30,000. It is estimated that 2.58 million low-profit small businesses would benefit from reduced enterprise income tax in the first three quarters of this year, with tax cuts amounting to Rmb12 billion, or Rmb4,600 for each business. At the same time, 28 million small-scale taxpayers and individually-owned businesses would enjoy temporary VAT and business tax exemptions, with tax cuts amounting to Rmb61.3 billion. The two tax cuts would amount to Rmb73.3 billion in total.