On 18th of Jan, 2019, the General Taxation Administration and Ministry of Finance of PRC jointly announced a Notice on Implementing Inclusive Tax Relief Policies for Small and Micro-profit enterprises, following the tax reduction statement released after the State Council executive meeting on Jan 9, 2019. Over the past two days, the two government departments have made more explanations regarding the implementation of the policy.
Generally speaking, circular and related explanations are as follows:
If monthly sales of a small-scale VAT taxpayer is no more than 100,000 yuan, it will be exempted from VAT.
Tax reduction in China
The current enterprise income tax ( EIT ) is 20%, however, according to the new policy:
If the annual taxable income of a small and micro-profit enterprise is no more than 1 million yuan, EIT will be charged on 25% of the taxable income, that is, the actual tax rate is 5%;
If the annual taxable income of a small and micro-profit enterprise is more than 1 million yuan but no more than 3 million yuan, EIT will be charged on 50% of the taxable income, that is, the actual tax rate is 10%.
The small and micro-profit enterprises mentioned above refer to enterprises engaged in the non-restricted and prohibited trades of the state, and meanwhile, meet the following three conditions:
1. the annual taxable income is no more than 3 million yuan;
2. the number of employees is no more than 300 people, including the number of workers who have established labour relationship with the enterprise and the number of labour dispatched to the enterprise;
3. the total assets is no more than 50 million yuan.
According to another explanation given by the Tax agency, the enterprise could declare their own reduced concessions without providing additional information.
And it’s also stated that this preferential tax policy will be effective since 1st of Jan, 2019 till 31st of Dec, 2021. And it will apply to all small and micro-profit enterprises, no matter in what way the tax is collected.
Source: Sophie Mao from CHinaLawHelp.com