New Tax and Fee Reductions for Chinese Enterprises Exceeded 2.5 Trillion Yuan in 2020: MOF

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China’s Ministry of Finance (MOF) says that its ongoing tax and administrative fee reductions saw a considerable increase in 2020 as part of broader efforts to mitigate the economic effects of the COVID-19 pandemic.

MOF said that it implemented 27 targeted tax and fee reduction measures in 2020, and forecasts that these measures collectively reduced the tax burden in Chinese enterprises by a further 2.5 trillion yuan (approx. USD$389 billion).

MOF highlighted tax and fee reduction measures in four areas in particular:

  1. Focused support for micro and small-enterprise bail outs. MOF said that nearly 90% of China’s more than 50 million small-scale tax payers are already exempt from value added taxes, and that another 6 million have seen their tax rates fall from 3% to 1%. During the period January to November 2020 a further 91.1 billion yuan in value-added tax reductions and exemptions were implemented. MOF points out that in 2020 private economy sales revenue saw a YoY increase of 8%, 2 percentage points ahead of the figure for enterprises nationwide.
  2. Effective protection of the production and supply of disease prevention and control materials during the COVID-19 pandemic. During the period from January to November 2020 tax and fee reductions for key enterprises involved in the production of materials for the prevention and control of the COVID-19 pandemic totalled 65.2 billion yuan.
  3. Assisting enterprises in troubled industries to resume work and production. MOF said that during the period from January to November 2020 it provided 38.2 billion yuan in value added tax exemptions to enterprises industries severely affected by the COVID-1I pandemic, including transportation, accommodation and the services sectors. 29.2 billion yuan in property tax and urban land usage tax exemptions were also provided to taxpayers in areas more heavily impacted by the pandemic.
  4. Vigorous support for the stabilisation of employment and maintenance of living standards. MOF said that as of the end of 2020 the tax burden rate (the sum of taxes paid by enterprises and their social welfare expenditures as a percentage of sales revenues) of the sales revenues of 100,000 key enterprises is expected to have fallen by 8% YoY.

MOF said that Chinese authorities will continue to improve tax and fee reduction policies and improve their “targeted” results in 2021, as part of ongoing efforts to mitigate the economic impacts of the COVID-19 pandemic.

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