July 2022
Di Wu and Teresa Huang
On May 21, 2022, the Shanghai Municipal People’s Government issued the Shanghai Action Plan for Accelerating Economic Recovery and Revitalization (Hu Fu [2022] No. 5) (hereinafter, the “Plan”), which provides institutional safeguards to coordinate the prevention and control of the pandemic, promote the orderly recovery and development of Shanghai’s economy, and relieve the pressure on enterprises. The Plan consists of 50 articles covering eight aspects, including relief for market players, restoration of order by resuming work and production, stabilization of foreign investment and foreign trade, promotion of consumption, promotion of investment, strengthening of resources and factors, protection of people’s livelihood, and optimization of the business environment. To help relieve the pressure on enterprises from the pandemic, this article will focus on the preferential policies that enterprises can enjoy pursuant to the Plan and the investment information worthy of attention, as specifically discussed below.
I. Tax and fee exemptions
Pursuant to Articles 1 to 10 of the Plan, enterprises can obtain exemptions and subsidies in social security payments, rents, utility costs, tax refunds, employee retention, and other aspects, which specifically include the following:
1. Phased deferred payment of “five social insurances and one provident housing fund”
(1) Deferred payment of social insurance
For five industries suffering from special hardship, namely, food and beverage, retail, tourism, civil aviation, highway, waterway, and railroad transportation, the payment of the social insurance premiums payable by the employers have been deferred by stages since April. In particular, the deferral period for pension and medical insurance premiums ends at the end of 2022 with the payment of unemployment and work injury insurance premiums deferred for no more than one year. Late payment fees are not charged during the deferral periods. Enterprises in other industries shall apply for payment deferral in accordance with the current national requirements of the state.
(2) Deferral of provident fund contributions
Any enterprise affected by the pandemic can apply for a deferral period lasting from April to December 2022 and supplement payments upon expiration of the period. During the deferral period, depositing employees can withdraw and apply for housing fund loans normally and will not be affected by the deferral.
2. Rent exemption
(1) Renting state-owned property
Small and micro enterprises, individual entrepreneurs, and private non-enterprise organizations with difficulties in operation will be exempted from property rent for six months in 2022.
Owners or operators and managers of non-state-owned property are encouraged to reduce or exempt property rent for small and micro enterprises and individual industrial and commercial households in reference to Shanghai’s standards.
(2) Subsidies for owners
If owners or operators or managers of non-state-owned property ultimately implement the reduction or exemption, those who meet the criteria will be granted a subsidy equivalent to 30% of the total amount of the reduced or exempted rent with the subsidy capped at RMB 3 million.
For state-owned and non-state-owned market entities that have reduced or exempted property rents, the corresponding property tax and urban land use tax will be reduced or exempted. In addition, banks are encouraged to provide preferential pledge loans and other support to the lessors that reduced or exempted property rents, depending on their needs.
3. Preferential utility charge (for non-resident users only)
(1) Subsidies
A financial subsidy equivalent to 10% of three months’ payable water (including sewage processing charges), electricity, and natural gas (excluding gas for gas-fired power generation enterprises) charges is given.
(2) Exemptions
For failure to pay bills in time during the period affected by the pandemic, the supply of water, electricity, and gas will not be suspended and the late payment fees are waived; the progressive price for over-quota water use in 2022 is exempted; the average tariff for broadband and dedicated Internet service lines for small, medium and micro-sized enterprises is reduced by another 10%; and the 3-month unit solid waste disposal fees are exempted.
4. Tax refunds and exemptions
(1) Tax deferral
For taxpayers who file monthly and quarterly returns, the deadline for filing tax returns in April, May, and June is extended to June 30; for corporate income taxpayers, the deadline for filing the 2021 annual corporate income tax returns on a consolidated basis is extended to June 30. Those who still have difficulties in filing tax returns within the above-mentioned period may apply for a filing extension or for deferring tax payment for up to three months.
(2) Further enhancement to the strength of the VAT credit refund policies
Pursuant to the national policy requirements, full credit refunds for both stock and incremental amounts in more industries shall be implemented. The retained stock VAT credits for medium-sized and large enterprises shall be refunded ahead of schedule, and the retained stock VAT credits for all eligible enterprises shall be “refunded as much as possible” by June 30, 2022.
(3) Reduction and exemption of property tax and urban land use tax
Taxpayers who have difficulties in paying property tax and urban land use tax due to the impact of the pandemic may apply for property tax and urban land use tax reductions and exemptions for their own property and land in the second and third quarters of 2022, and no tax reductions and exemptions will be granted to industries whose development is restricted or discouraged by the state. For enterprises whose houses and land are expropriated by the government to address emergency situations, the corresponding property tax and urban land use tax can be reduced or exempted in accordance with applicable regulations.
(4) VAT reductions and exemptions
From May 1, 2022 to the end of the year, the income from eligible express delivery services is exempted from VAT.
5. Subsidy for employment stabilization
(1) No layoffs and fewer layoffs
Food and beverage, retail, tourism, transportation, culture, sports, entertainment, accommodation, exhibition, and other industries in difficulty that are seriously affected by the pandemic and do not lay off or only lay off fewer employees can apply for a one-time employment stabilization subsidy of RMB 600 per person according to the number of employees for whom social security is declared by the enterprise, with a subsidy ceiling of RMB 3 million per enterprise.
(2) Employment absorption
For employers employing personnel who have registered their unemployment for more than three months or the college graduates in Shanghai in 2022, executing labor contract for more than one year and paying their social insurance premiums as required, a one-time employment absorption subsidy of RMB 2,000 per person will be paid.
II. Policy support
To promote speedy economic recovery, the Plan also lists a number of measures to support industry development, and relevant enterprises may focus their attention on such measures:
1. Support for the resumption of production and operation by foreign-funded enterprises
More targeted, timely, and convenient online and offline services will be provided to foreign-funded enterprises to address logistics, epidemic prevention materials, resumption of work and production, major projects, construction of regional headquarters, construction of R&D centers, and other issues.
2. Relief of business difficulties facing foreign trade enterprises
Fast and convenient services concerning export rebates, export credit insurance claims, etc., will be provided. Port enterprises, shipping companies, and shipping port enterprises are encouraged to reduce or exempt the demurrage fees, cargo storage fees, related logistics operations, and other fees for foreign trade enterprises. In addition, financial policy support for foreign trade enterprises will be enhanced, financial support for transformation will be provided, and services such as more convenient import and export customs clearance will be provided.
3. Encouragement of “bulk consumption” to promote consumption
The Plan encourages the consumption of automobiles and home appliances. Consumption subsidies will be provided not only to car consumers but also to large shopping malls, e-commerce platforms, and other enterprises that conduct promotional activities through home appliance trade-in, green smart home appliances, promotion of electronic consumer products, and other activities.
4. Support to promotion of consumption through “shopping festivals” and other ways
Enterprises are encouraged to promote consumption through “shopping festivals,” nighttime economy, the issuance of consumption coupons, etc. And funding will be provided to support market-leading innovative business models and types, creative activities, and enterprises with outstanding contributions to the growth of the consumer market.
5. Support to the development of cultural and creative, tourism and sports industries
Non-reimbursable funding, loan subsidies, and other means will be employed to increase the support to performance venues, cinemas, physical bookstores, and fitness venues. In addition, cultural and creative parks, cultural and creative enterprises, and cultural and sports tourism projects will be supported to facilitate the speedy recovery of the cultural and creative, tourism, and sports industries. For eligible travel agencies, the refund ratio of the tourism service quality deposit is increased from 80% to 100%.
III. Encouraged investment domains
In order to actively expand effective investment, the Plan has put forward corresponding incentives for the following domains:
1. Construction and real estate
(1) Support will be provided to the major railroad corridors, rail transportation networks, aviation hubs, ports, energy, inland waterways, water conservancy, comprehensive underground pipeline corridors, and other key infrastructure projects to accelerate the commencement of construction.
(2) The healthy development of the real estate industry will be encouraged to establish a green channel for the pre-approval of real estate projects to promptly start the supply of new batches of new market-oriented commercial housing projects on the market, and further shorten the whole process time for pre-development, land acquisition, construction commencement, and sales.
(3) The private investment domain will be further expanded to encourage and attract more social capital to participate in a number of major projects such as municipal railroads and new infrastructure, and private investment is encouraged to participate in the construction of key projects through an integrated development model with a focus on urban infrastructure, etc.
2. Integrated circuits and new energy vehicles
A number of major industrial projects such as integrated circuits and new energy vehicles will be promoted to speed up the landing of the projects with stronger support in terms of project approval, factor guarantee, etc.
3. Investment business carried out by institutional investors
More qualified asset management institutions will be encouraged to participate in the Qualified Foreign Limited Partner (QFLP) pilot and Qualified Domestic Limited Partner (QDLP) pilot, and pilot enterprises will be encouraged to set up global or Asia-Pacific investment management centers in Shanghai to facilitate the development of their cross-border two-way investment business.
In general, the Plan covers various aspects with corresponding measures in foreign trade, consumption, and investment, especially in the field of investment, and with high expectations for infrastructure construction, development of major construction projects, urban renovation, etc. It is hoped that through a multi-pronged approach, Shanghai’s economy can recover as soon as possible, enterprises affected by the epidemic can also get out of the predicament as soon as possible, and enterprises impacted by the pandemic can overcome their hardship with the help of the above-mentioned preferential measures.