China\u2019s central and local governments issued several support measures to ease the financial burdens and stimulate the growth of small businesses. Here is a recap of all the latest major tax incentives policies for small-scale taxpayers and small and low profit enterprises in China.<\/p>\n
The sales revenue of small-scale taxpayers that are generally subject to 3% VAT will now, be VAT exempted for the period 1 April 2022 to 31 December 2022. The VAT exemption is only for the normal VAT invoice issued from 1 April 2022 till 31 December 2022. In other word, if any special VAT invoice issued during this period, the applicable VAT rate is still 3%. It also extends the reduction of VAT rate from 1% to 3% for the taxable sales income of small-scale VAT taxpayers earned before 31 March 2022.<\/p>\n
The VAT exemption threshold for small\u2011scale taxpayers has been extended the period from 1 April 2021 to 31 December 2022, and the VAT-exempted sales has been raised from RMB100,000 (or RMB300,000 per quarter) to RMB150,000 (or RMB450,000 per quarter).<\/p>\n
China is implementing value-added tax credit refunds on a large scale at total RMB1.5 trillion in 2022. For small & micro enterprises and individual businesses, outstanding VAT credits will be fully refunded in a lump sum by the end of June 2022. Newly added credits will be fully refunded on a monthly basis starting on 1 April 2022. Here, small-scale taxpayers normally refer to taxpayers whose annual VAT taxable sales do not exceed RMB 5 million.<\/p>\n
The standard China CIT rate for both foreign- and domestic enterprises is currently at 25%. From 1 January 2022 to 31 December 2024, the CIT liability of small and low-profit enterprises has been halved for the portion of taxable profit exceeding 1 million RMB but not exceeding RMB 3million. It means following the new regulation for 3 years, the new effective CIT rate for the portion of taxable profit RMB 1~3 million will be reduced from 10% to only 5%.<\/p>\n
The portion of annual taxable income that does not exceeds RMB 1 million of a small and low-profit enterprises will be subject to an effective CIT rate of 2.5% from 1 January 2021 to 31 December 2022.<\/p>\n
According to the regulation, to qualify as a small and low-profit enterprises, businesses must satisfy the following criteria:<\/p>\n
From 1 January 2022 to 31 December 2022, newly purchased equipment and appliances (i.e. fixed assets other than housing and buildings) by small and medium enterprises with a unit value of more than 5 million RMB, can be deducted 100% in the current year when computing CIT if the minimum depreciation period is 3 years.<\/p>\n
For equipment and appliances with a minimum depreciation period of 4, 5, and 10 years, the amount that can be deducted for CIT purposes is 50% of the unit value in the current year. The remaining value can be deducted according to the remaining depreciation years.<\/p>\n