The Chinese central government has flagged new tax cuts which are expected to reduce the tax burden for small and micro-enterprises by approximately 200 billion yuan per year.
A meeting of the standing committee of China’s State Council held on 9 January said that it would launch a raft of new financial inclusion tax cuts for small and micro-enterprises, given the “relationship between the effective development of small and micro-enterprises and steady performance of the economy as well as stable employment.”
Chief amongst the changes are adjustments to the benchmarks for small businesses, which will translate into a large-scale expansion in eligibility for preferential tax policies.
Small businesses with taxable incomes of under 1 million yuan and those with taxable incomes of between 1 to 3 million yuan will see their taxable income quotas cut by 25% and 50% respectively, which will reduce their tax burdens to 5% and 10% respectively.
According to a report from state-owned media these adjustments to preferential tax policies will cover over 95% of tax paying enterprises, of which 98% are private enterprises.
The State Council will also increase the threshold for value-added tax from 30,000 yuan to 100,000 yuan in sales for small-scale tax payers, a category which primarily includes small and micro-enterprises, individual industrial and commercial entities and other individuals.
Province-level governments will be permitted to provide various tax breaks for small-scale payers of value-added tax, in areas including resource levies, urban maintenance levies, stamp duties, urban land usage levies and arable land occupation levies.
The State Council also plans to expand the scope of preferential tax polices for investment in start-up tech companies, and provide more tax breaks to venture investment companies and angel investors.
In order to compensate for the gap in local government fiscal revenues created by large-scale cuts to taxes and administrative fees, the Chinese central government plans to expand standard transfer payments to the regions.
The latest raft of policies is expected to reduce the tax burden on Chinese small and micro-enterprises by approximately 200 billion yuan, and arrive following large-scale tax and fee cuts in 2018 which saw a reduction in full year taxes by approximately 1.3 trillion yuan.
