Further measures to increase corporate tax reform concessions

The State Council executive meeting, chaired by Premier Li Keqiang on January 9, decided to introduce a number of inclusive tax cuts targeting small and micro-sized enterprises.


The first measure is to lower the standards defining small and micro-sized enterprises which can enjoy corporate income tax concessions and increase the income tax cuts at the same time. The annual taxable income of small and micro-sized enterprises will be reduced 25% and 50%, for enterprises with income below one million yuan and enterprises with income between one million yuan and three million yuan respectively. These reductions will be included in the taxable income, reducing the tax burden to 5% and 10%. The adjusted preferential policy will cover more than 95% of taxpaying enterprises, of which 98% are privately owned enterprises.


The second measure is to raise the VAT threshold from monthly sales of 30,000 yuan to 100,000 yuan, benefiting mainly the small and micro-sized enterprises, individual industrial and commercial businesses and other individuals.


Then comes the third measure which allows the governments in the provinces (autonomous regions and municipalities) to reduce local taxes such as resources tax, urban maintenance and construction tax, stamp duty, urban land use tax and cultivated land occupation tax as well as surcharges on education and local education. These reductions will be applied to the small-scale VAT taxpayers within the range of 50%.


Expanding the scope of enjoying preferential policies for investing in start-up technology-based enterprises is the fourth measure. This will allow those venture capital companies and angel investors investing in such enterprises to have more tax incentives.


Lastly, the central government will increase local general transfer payments in order to make up for the local financial gap caused by large-scale tax and fee reductions.


The above-mentioned tax reduction policies are applicable to foreign-funded and domestic-funded enterprises and can be traced back to January 1 this year. The implementation period is tentatively set for three years. It is estimated that the annual reduction for small and micro-sized enterprises will be around 200 billion yuan.


We believe that these measures have benefitted small and medium enterprises, specifically foreign-invested enterprises that are breaking into the Chinese market. These measures have greatly cut down their operational burden and made China more attractive for enterprises looking to expand their business abroad. All these also show the determination of China to attract and support investments.


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