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China Announces Tax Concessions for Small and Micro-Businesses

Any company with an annual revenue of RMB3 million or below will now be entitled to further preferential tax treatment as part of a raft of government measures designed to boost small and low-profit businesses. Under the terms of the same initiative – announced following a 9 January executive meeting of the State Council – the monthly threshold for VAT has been more than tripled to RMB100,000, while local government departments have also been granted the right to reduce the tax liability of small-scaletax payers at their own discretion.

In terms of more specific details, the supportive measures authorised by the State Council include the following:

  • In the case of small and low-profit businesses, their eligibility for preferential enterprise income tax treatment has been significantly expanded, while a substantial reduction in the overall enterprise income tax level has also been introduced. For small and low-profit businesses with annual taxable income of RMB1 million or below, their assessment will be based on 25% of their income level, while, in the case of businesses with an income of between RMB1 million-3 million, the assessment will be based on 50% of their taxable revenue. This is expected to reduce the respective tax burdens by 5% and 10%. In total, more than 95% of corporate taxpayers (98% of which are private businesses) are expected to benefit from these new arrangements
  • The VAT threshold for small-scale taxpayers (principally small and micro-businesses and individually-owned businesses) has been raised from monthly sales of RMB30,000 to RMB100,000
  • Provincial (autonomous regional and municipal) government bodies will have the discretion to reduce taxes by up to 50% in the case of small-scale tax taxpayers with regard to several locally-administered taxes, including Resource Tax, Urban Maintenance and Construction Tax, Stamp Duty, Urban Land Use Tax and Farmland Occupation Tax, as well as being entitled to reduce any due educational surcharges
  • In the case of high-tech start-ups, the range of investment-related tax incentives available to venture capital firms and angel investors has been widened
  • Increased subsidies are to be transferred from central government to local government bodies to cover any funding shortfall occasioned by the reduction in revenue from local business taxes

The above preferential taxation measures are to be applied retrospectively with a commencement date of 1 January this year and will be (provisionally) effective for three years. In total, the accrued annual benefits of these newly-adopted supportive measures for the mainland’s small and micro-businesses is expected to be in the region of RMB200 billion.

For further details, please access the following link:

State Council Executive Meeting Decides to Roll Out Further Inclusive Tax Breaks for Small and Micro Businesses (in Chinese)

Quick view: State Council executive meeting on Jan 9

Content provided by Picture: HKTDC Research
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