China Preferential Tax Policies to Support Small and Micro Enterprises
Recent years, China has released a series of preferential tax policies to promote the development of small and micro enterprises. Kaizen hereby summarizes the preferential tax policies applicable to small and micro enterprises in accordance with the Guidelines on Preferential Tax Policies for Supporting the Development of Small and Micro Enterprises and Individual Industrial and Commercial Enterprises for clients?reference.
VAT Exemption Policy
From January 1, 2023 to December 31, 2027, VAT small-scale taxpayers with monthly sales of less than 100,000 yuan (inclusive of 100,000 yuan) will be exempted from VAT.
Note:
- Applicable to VAT small-scale taxpayers who pay taxes on a regular basis.
- VAT small-scale taxpayers, whose monthly sales do not exceed 100,000 yuan for VAT taxpayers declaring VAT on monthly basis or whose quarterly sales do not exceed 300,000 yuan for VAT taxpayers declaring VAT on quarterly basis, can enjoy VAT exemption.
- VAT small-scale taxpayers whose total monthly sales exceeding 100,000 yuan, but not exceeding 100,000 yuan after deducting the sales of real estate occurring in the current period, the sales of goods, labor, services, and intangible assets are exempt from VAT.
- VAT small-scale taxpayers who are subject to the variable levy policy shall determine whether they can enjoy the above VAT exemption policy based on the sales after the difference.
VAT Reduction Policy
From January 1, 2023 to December 31, 2027, for VAT small-scale taxpayers applicable to 3% levy rate for the taxable sales income, the VAT shall be levied at a reduced levy rate of 1%; for prepaid VAT items with 3% pre-levy rate, the VAT shall be levied at a reduced pre-levy rate of 1%.
Six Taxes and Two Fees Reduction Policy
From January 1, 2023 to December 31, 2027, the resource tax (non-water-containing resource tax), urban maintenance and construction tax, property tax, urban land use tax, stamp duty (excluding stamp duty on securities transactions), cultivated land occupation tax, educational surcharge, and local educational surcharge will be levied by half on VAT small-scale taxpayers, small and low-profit enterprises and individual industrial and commercial households.
VAT small-scale taxpayers, small and low-profit enterprises and individual industrial and commercial households who have enjoyed resource tax, urban maintenance and construction tax, real estate tax, urban land use tax, stamp duty, cultivated land occupation tax, educational surcharge, local educational surcharge, and other preferential policies in accordance with the law may enjoy this preferential policy simultaneously.
Corporate Income Tax Relief Policy
For small and low-profit enterprises, the taxable amount shall be reduced by 25%, and the enterprise income tax shall be paid at the tax rate of 20%. This policy is in effect until December 31, 2027.
Small and low-profit enterprises refer to those engaged in industries that are not restricted or prohibited by the State, with annual taxable income does not exceed 3 million yuan, the number of employees does not exceed 300, and the total assets do not exceed 50 million yuan.
Where business activities are started or terminated in the middle of a year, the actual business period shall be taken as one tax year to determine the above relevant indicators.
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