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On March 1st, 2022, the Ministry of Finance and State Administration of Taxation of People’s Republic of China announced that, in order to further support the development of small and micro enterprises, small-scale VAT taxpayers, small and low-profit enterprises, and individual households, a reduction on a number of taxes by 50% of the amount payable may be applied. Such taxes include:
· Resource tax
· Urban maintenance and construction tax
· Real estate tax
· Urban land use tax
· Stamp tax (excluding securities transaction stamp tax)
· Cultivated land occupation tax
· Education surcharge
· Local education surcharge
In case such small-scale taxpayers have already enjoyed the abovementioned taxes and other preferential treatments according to the law, the above preferential policies stipulated in this announcement can be reimposed.
The small and low-profit enterprises refer to those engaged in industries that are not restricted or prohibited by the Authorities, and at the same time meet the following three requirements:
1. Annual taxable income does not exceed RMB 3 million
2. Employee count does not exceed 300 personnel
3. Total assets do not exceed RMB 50 million.
The employee count includes the number of employees who have established labor relations with the enterprise and the number of dispatched workers accepted by the enterprise.
This policy will be implemented for 2 years, from 1st January 2022 to the 31st of December 2024.
The announcement of this policy is in fact a development of another policy previously introduced in the year 2018. It not only prolongs the effective period, but also increases the number of businesses applicable to the preferential policy, which are small and low-profit enterprises and self-employed households/individuals, which means that small and low-profit businesses registered as general VAT payers can also apply this policy.
If a taxpayer meets the conditions but fails to declare in time to enjoy the reduction or exemption from taxes, a company can apply for a deduction of the tax payable in the subsequent tax period or apply for a tax refund. For those who apply for a deduction of the taxable fees and charges for subsequent tax periods, the system will automatically deduct the taxable fees and charges of the same tax type when the taxpayer subsequently declares.
If you would like to know more about the most recent tax and financial developments in China, or about the services mentioned above, please contact us at info@phcadvisory.com.
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