Tax reliefs for small enterprises and sole proprietorships extended till 31 December 2027

published on 24 August 2023 | reading time approx. 5 minutes

To further support the development of micro, small enterprises and sole proprietorships the Ministry of Finance (MOF) and the State Administration of Taxation (STA) extended and adjusted various tax reliefs. The measures and the extended expiry dates are summarized below.

MOF/SAT Announcement [2023] No. 12 and 19

Incentive type	Target group	Tax relief or measure
IIT - Individual Income Tax	Sole proprietorships	From 1 January 2023 to 31 December 2027 the IIT on annual taxable income not exceeding RMB 2m. will be reduced by 50 percent. The policy can be enjoyed in combination with other existing IIT policies. Previously the tax incentive was granted for taxable incomes not exceeding RMB 1m. and ending 31 December 2024.
“Six taxes & two fees”*	Small scale VAT payers, small and low-profit enterprises, sole proprietorships	From 1 January 2023 to 31 December 2027, the taxes payable for “six taxes & two fees” will be reduced by 50 percent. Announcement No. 12 further clarifies that the 50percent reduction can be enjoyed with other preferential policies concerning the “six taxes and two fees”. Previously, the tax relief was scheduled to expire at the end of 2024 and only included a reduction of the “six taxes and two fees” within 50 percent.
CIT - Corporate Income Tax	Small low-profit enterprises	The policy of reducing the taxable income by 75 percent and paying CIT at a rate of 20 percent will be extended until 31 December 2027, leading to an effective CIT rate of 5 percent. Previously the policy was set to expire on 31 December 2024.
VAT - Value Added Tax	Small scale VAT payer	Small scale VAT payers with monthly sales of less than RMB 100,000 will be exempted from VAT. Further, small scale VAT payers with a 3 percent levy rate can enjoy a reduced levy rate of 1 percent. Previously both policies shall end by 31 December 2023 but are now extended until 31 December 2027.

*Six taxes & two fees: Resource tax (with the exception of the water resource tax), urban maintenance and construction tax, property tax, urban land-use tax, stamp duty (except stamp duty on securities transactions), land-use tax, education surcharge and local education surcharges.

In MOF/SAT Announcement [2023] No. 12 and 19 small and low-profit enterprises are defined as enterprises with annual taxable income not exceeding RMB 3m., number of employees not exceeding 300 and total assets not exceeding RMB 50m. (conditions have to be met simultaneously).

Newly established general VAT payers meeting which until the end of the previous month meet two of above conditions (no more than 300 employees and total assets of no more than RMB 50m.) may declare the six taxes and two fees before the first annual tax settlement as small and low-profit enterprises.

Taxes levied before publication of Announcement [2023] No. 12 can be offset against future taxes payable or refunded.

MOF/ SAT Announcement [2023] No. 13

Incentive type	Target group	Tax relief or measure
Financing cost	Micro and small enterprises, sole proprietorships	Loan contracts between financial institutions and micro, small enterprises and sole proprietorships and are exempted from stamp duty. Financial institutions are exempted from VAT on interest income derived from loans to micro and small enterprises and sole proprietorships with contract amounts and loan balances of less than RMB 1m. Small and micro enterprises are defined according to the "Standard Provisions for the Delineation of Small and Medium-sized Enterprises" (Ministry of Industry and Information [2011] No. 300).

In case of questions about the announcements and tax measures or if you need help with tax declarations, please do not hesitate to contact us.