Shanghai: Easing of the Lockdown and Accelerating Relief for Enterprises

The announced social security policy is currently only applicable to five special hardship industries such as catering, retail, tourism, civil aviation, highway, waterway and railroad transportation. Applicable enterprises can defer the payment of social insurance from April onwards in a phased manner, and thereof pension and medical insurance could be deferred to the end of 2022, while unemployment and work injury insurance to a period of no more than one year.

  

In addition, micro, small and medium-sized enterprises and individual entrepreneurs (not limited to the above five specific industries) affected by the epidemic with difficulties in operation can also apply for deferral of social insurance in accordance with the relevant provisions, and late payment interests will be waived during the deferral period.

  

For housing fund, all enterprises affected by the epidemic may apply for a deferral of housing fund payment for the period from April to December 2022, with retroactive payments to be made upon expiration.

  

Due to the lockdown, Shanghai Tax Authority has extended the deadline for periodic tax filing for April, May and June to 30 June 2022, while the deadline for corporate income tax annual filing has also been extended to 30 June 2022. According to the announcement from tax authority, enterprises that still have difficulties can apply for a further extension of filing, or apply for deferral of tax payment for a maximum of three months. But it is still recommended to communicate with the competent tax bureau in advance to confirm the detailed application procedures.

  

According to the measures introduced at the end of March, with supporting documents, small and micro enterprises and individual entrepreneurs who rent state-owned property can apply for rent exemption for three months and those who are located in a high-risk area can be exempted for another three months. According to the latest action plan, small and micro-sized enterprises and individual entrepreneurs benefiting rent exemption could be directly exempted from paying rent for six months in 2022 without submitting supporting documents.

  

According to the action plan, a ten percent financial subsidy for three months on non-household utility and natural gas expenses will be granted to enterprises and relevant late payment interests will be waived. The over-rate progressive tariff water charges will be waived for 2022. Furthermore, the average tariff for broadband and dedicated lines for small and medium-sized enterprises will be reduced by another ten percent and the domestic waste disposal fee for enterprises will be waived for 3 months. Administrative fees for inspection and testing of special equipment will also be reduced to 50 percent from April to December 2022.

  

Taxpayers affected by the epidemic who have actual difficulties in paying real estate tax and urban land use tax (not limited to the industries) can apply for a reduction or exemption of real estate tax and urban land use tax for self-use properties and land in the second and third quarters of 2022.

  

Full refunds of remaining and incremental value added tax credits will be implemented in more industries, and advance refunds of remaining tax credits for medium-sized and large enterprises.

  

For catering, retail, tourism, transportation, sports and entertainment, accommodation, exhibition and other difficult industries, providing there is no layoffs or less layoffs, a one-time stabilization subsidy of 600 CNY per person will be granted to the enterprises according to the headcount in social security premium of last month before application. For eligible employers, a one-time employment absorption subsidy of 2,000 CNY per person will be granted.

  

The financial institutions are encouraged to implement services for deferred repayment of principal and interests to small, medium and micro enterprises. The deferred period, in principle, does not exceed the end of 2022. At the same time, banks are encouraged to set up special relief loans for enterprise and to provide relief loans at preferential interest rates to key enterprises for epidemic prevention, enterprises in difficulty affected by the epidemic, small, medium and micro enterprises and individual entrepreneurs.

  

Shanghai issued 21 measures on 28 March 2022, which included various policies to help enterprises and alleviate their difficulties, such as tax refund and reduction, tax benefits, rent reductions, financial subsidies, financing support and employment stabilization, specifically including: implementing large-scale VAT credit refund; increasing the intensity of tax and fees reduction; extending the scope of reduction of “six taxes and two fees” to small enterprises with low profits and individual entrepreneurs; postponing the deadline for tax filing; and rent exemption for small and micro enterprises and individual entrepreneurs. The new action plan was issued on 29 May, as supplement to the 21 measures released on 28 March.

  

Shanghai is about to resume full-scale operation, and for many enterprises, the two-month-long lockdown has affected their operations from different aspects, especially the increased pressure on cash flow. The new round of action plan issued by Shanghai government focuses on relieving the current cash flow pressure of enterprises and helping them to restart normal operations smoothly. It is noted that a measure similar to the full exemption of social security in 2020 has not been introduced, and it is not yet known whether there will be a stronger relief policy to follow. Enterprises should try their best to apply for the aforementioned deferral, reduction, exemption and subsidy policies in light of their own situation to minimize the impact of the epidemic on cash flow. At the same time, enterprises should also pay attention to the tax treatment of some of the above cash subsidies and include them in their taxable returns in due course to ensure their tax compliance.