China - Further tax relief for small and micro enterprises

published on 21 April 2021 | reading time approx. 1 minute

In 2020, the Chinese government initiated various aid measures and tax relief for companies in order to reduce the negative economic impact of the corona virus epidemic. In 2021, China has announced further tax relief measures regarding value added tax and corporate income tax to further relieve the burden on small and micro enterprises.

Value Added Tax (VAT)

For enterprises with small-scale VAT payer status, the reduced VAT rate of 1 per cent will continue to apply from January 1, 2021 to December 31, 2021, instead of the usual 3 per cent . Small-scale VAT payers in Hubei Province will continue to be exempt from VAT in 2021.

Furthermore, enterprises with monthly turnover up to and including RMB 150,000 (instead of RMB 100,000 previously) will be exempted from VAT from April 01, 2021 to December 31, 2022. The sales tax exemption must be made through a declaration by the taxpayer.

Small taxpayers can generally choose to be taxed for a period of one month (150,000 RMB) or one quarter (up to and including 450,000 RMB). However, once chosen, the period cannot be changed within a tax year.

Corporate Income Tax (CIT)

Small and micro enterprises with taxable income below RMB 1 million can currently enjoy a reduced CIT rate of 5 per cent, instead of the standard CIT rate of 25 per cent , during the period from January 1, 2018 to December 31, 2020. In this regard, the Chinese government plans to further reduce the CIT rate for the small and micro enterprises whose annual taxable profit does not exceed RMB 1 million. Instead of 5 per cent, a further reduction to 2.5 per cent has been announced in 2021. The corresponding official regulation on the part of the Chinese tax authority should be published before the end of April 2021. We will follow the further development and keep you informed.