2019.1.17
Karl Zhang
To further support the development of small and micro enterprises, the Ministry of Finance and the Administration of Taxation have jointly issued a circular (hereinafter, the “Circular”) recently regarding the implementation of the inclusive tax deduction or exemption policy for small and micro enterprises. The Notice mainly includes the following:
1. VAT exemption
Pursuant to the Circular, small-scale taxpayers with monthly sales of not more than RMB10,000 shall be exempt from the value-added tax.
2. Corporate income tax reduction
Pursuant to the Circular, 25% of the portion of the annual taxable income generated by a small or micro enterprise that is below RMB1,000,000 shall be taxed at a rate of 20% for the enterprise income tax i. For the portion between RMB1,000,000 and RMB3,000,000, 50% of it shall be taxed at a rate of 20% for the enterprise income tax..
3. Reduction and exemption of other taxes
In addition, for small-scale VAT taxpayers, the people’s governments in the provinces, autonomous regions, and municipalities under the direct jurisdiction of the State Council may, based on the actual local circumstances and macroeconomic regulatory needs, reduce the resource tax, urban maintenance and construction tax, housing tax, urban land use tax, stamp tax (not including the stamp tax on securities transactions), farmland occupation tax, education supplementary tax surcharge and local education surcharge within 50% of the taxed amount.
If a small-scale taxpayer is already enjoying incentives for resource tax, urban maintenance and construction tax, housing tax, urban land use tax, stamp tax (not including the stamp tax on securities transactions), farmland occupation tax, education supplementary tax surcharge, local education surcharge and other preferential policies pursuant to law, such preferential policies may continue to be applied.
In addition, the Circular also explains the standards for small and micro enterprises and eases the standard for investment targets set forth in the Circular of the Ministry of Finance and the State Administration of Taxation on the Tax Policies for Venture Capital Enterprises and Individual Angel Investors, providing those enterprises with more practical benefits.
The Circular will be valid from January 1, 2019 to December 31, 2021 upon issuance. The original Circular of the Ministry of Finance and the State Administration of Taxation on Renewing the Value-Added Tax Policy for Small Low-profit Enterprises (Cai Shui [2017] No. 76) and the Circular of the Ministry of Finance and the State Administration of Taxation on Further Expanding the Scope of the Preferential Income Tax Policy for Small Low-profit Enterprises (Cai Shui [2018] No. 77) is abolished at the same time.