Preferential Tax Policies

Date: 2016/9/4 22:34:19 Views：

As far as enterprise income tax is concerned, a series of preferential tax policies are available for small low-profit enterprises. Since the Law of the People’s Republic of China on Enterprise Income Tax was put into force in 2008, the small low-profit enterprises have been incorporated into the coverage scope of favorable tax policies. The enterprise income tax is collected based on the 20% of tax rate, suggesting 5 percentage point lower than the normal tax rate and the reduced tax burden of 20%. Since the 50% tax cut policies for the enterprise income tax of small low-profit enterprises became effective in 2010, those small low-profit enterprises with an annual taxable income of less than RMB 30,000 (including RMB 30,000) can have 50% of their incomes calculated as the taxable incomes and pay their enterprise income tax based on 20% of the tax rate. Since 2012, the annual taxable income for those small low-profit enterprises which access 50% tax cut policies has been increased to RMB 60,000. In 2014, the micro and small enterprises could enjoy more generous tax treatments. The annual taxable income has been raised to RMB 100,000, and the enterprises which are subjected to verification-based tax collection are included in the coverage scope of favorable tax policies. 

When it comes to VAT and business tax, small taxpayers and the self-employed have also accessed a series of favorable tax policies. Since November 1, 2011, the thresholds of VAT and business tax for the self-employed people have been raised from the monthly sales income (or business revenue) of RMB 2,000 to RMB 5,000 uniformly to the monthly sales income (or business revenue) of RMB 5,000 to RMB 20,000. In fact, all the local tax authorities have adopted the upper limit of RMB 20,000. After this preferential tax policy was implemented, over 9.24 million self-employed people have been exempted from VAT and business tax, so the annual tax cut can come close to RMB 29 billion. On August 1, 2013, the preferential tax policies on the thresholds of VAT and business tax for the self-employed people have been expanded to the micro and small enterprises. Of the small VAT payers and business tax payers, the enterprises or non-enterprise units with the monthly sales income or business revenue of no more than RMB 20,000 are exempted from VAT and business tax. As a result, about 20 million self-employed people and micro and small enterprises have benefited from the preferential tax policies. Since October 1, 2014, the thresholds of VAT and business tax for micro and small enterprises have been raised again to RMB 30,000, so the favorable tax treatment has become more generous. In the meantime, China has also introduced the preferential tax policies to support the micro and small enterprises’ financing, technological innovation, entrepreneurship and employment. These policies prove extremely essential to the development of micro and small enterprises.


A series of preferential tax policies have provided some tangible benefits for micro and small enterprises. In 2014, the favorable policy on enterprise income tax benefited 2.46 million micro and small enterprises, 90% of all the enterprises of this type, and the tax reduction and exemption amount totaled RMB 10.1 billion; the favorable policy on the reduction and exemption of VAT and business tax have benefited about 22 million micro and small enterprises, and the tax reduction and exemption amount totaled RMB51.1 billion, including RMB 30.7 billion for VAT and RMB 20.4 billion for business tax. If the exemption amount of the three types of taxes is consolidated, micro and small enterprises accessed the total tax reduction and exemption amount of RMB 61.2 billion in 2014.  

When it comes to the future support for the development of micro and small enterprises, Li Sanjiang, Director of the SAT’s Tax Policy and Legislation Department, said that the tax authorities should earnestly implement the preferential tax policies and actively explore the further policy plans for supporting the development of micro and small enterprises to increase the role of tax in serving the economic development. 

(Source: the State Administration of Taxation)