Updates on Tax Relief for Companies in China

TAX RELIEF FOR MANUFACTURING COMPANIES

Deferred Payment of VAT, CIT, IIT & Surcharges of Q4 2021

Micro, small and medium-sized enterprises in the manufacturing industry can postpone payment of 50% of the amount of payable taxes and surcharges.

The deferred taxes include enterprise income tax, individual income tax (except withholding tax), domestic value-added tax, domestic consumption tax and urban maintenance and construction tax, education surcharge and local education surcharge, for periods of October, November and December 2021 (monthly payment) or the fourth quarter of 2021.

The period of suspension is three months.

According to No. 2 Announcement of State Administration of Taxation of 2022, the period of suspension is extended by another 6 months.

Deferred Payment of VAT, CIT, IIT & Surcharges of Q1 and Q2 2022

Medium-sized enterprises in the manufacturing industry can postpone payment of 50% of payable taxes and surcharges.

Small & low-profit enterprises in the manufacturing industry can postpone the full amount of payable taxes and surcharges.

The deferred taxes include enterprise income tax, individual income tax (except withholding tax), domestic value-added tax, domestic consumption tax and urban maintenance and construction tax, education surcharge and local education surcharge, for periods from January to June 2022 (monthly payment) or the Q1 and Q2 of 2022.

The period of suspension is six months. Upon expiration of the delay period, the taxpayer shall pay the deferred taxes according to law.

 
VAT EXTRA DEDUCTION

From April 1st, 2019, to December 31st, 2021, production and life service taxpayers are allowed to add extra 10% the amount of input tax deductible for the current period, to offset the tax payable.

From October 1st, 2019 to December 31st, 2021, the extra deduction rate for life services taxpayers is increased to 15%. According to Announcement No.11, 2022 of the State Administration of Taxation of the Ministry of Finance, the above policy is extended to December 31st, 2022.

 

INPUT VAT REFUND

According to Report on the Work of the Government in 2022, for small and micro enterprises, all the remaining input VAT credits shall be refunded in one lump sum before the end of June, and the incremental input VAT credits shall be refunded in full.

 

SMALL SCALE VAT TAX -PAYERS

From April 1, 2021 to December 31, 2022, small-scale VAT taxpayers with monthly sales of less than RMB 150,000 (including this amount) will be exempted from VAT.

 

SIX TAXES AND TWO FEES

From January 1st 2022 to December 31st 2024, it shall be determined by the people's governments of provinces, autonomous regions and municipalities directly under the Central Government in light of their actual conditions and the needs of macro-control. Small-scale VAT payers, small & low- profit enterprises and individual businesses can reduce resource tax, urban maintenance and construction tax, real estate tax, urban land use tax, stamp duty, farmland occupation tax, education surcharge and local education surcharge by no more than 50%. (Announcement No.10, 2022 of the State Administration of Taxation of the Ministry of Finance)

 

EXTRA DEDUCTION OF R&D EXPENSES BEFORE TAX

For R&D expenses actually incurred in carrying out research and development activities, where intangible assets have not been formed and included in the profits and losses of the current period, 75% extra of the actually incurred amount are allowed for pre-tax deduction on the basis of actual deduction; where intangible assets have been formed, amortization shall be based on 175% of the costs of the intangible assets before tax.

From 1 January 2021, extra deduction of 100% are applied for manufacturing enterprises. Where intangible assets have not been formed, 200% of R&D expenses actually incurred can be deducted before tax. Where intangible assets have been formed, amortization shall be based on 200% of the costs of the intangible assets before tax. This policy is effective before 31 December 2023.

According to Report on the Work of the Government in 2022,

extra deduction of 100% will be applied for technology- based small and medium enterprises.

 

ALL COMPANIES – PREFERENTIAL CIT TAX RATES

 

CIT RATE

CRITERIA

Rate 2.5%

  • -  Taxable income no more than RMB 1 million

  • -  Number of employees no more than 300

  • -  Total assets no more than RMB 50 million

  • -  Eligible period: from January 1st 2021 to December 31st 2022

Rate 10%

  • -  Taxable income between RMB 1 million and RMB 3 million

  • -  Number of employees no more than 300

  • -  Total assets no more than RMB 50 million

  • -  Eligible period: from January 1st 2019 to December 31st 2022 (Report on the Work of the Government in 2022)

Rate 25%

Statutory Rate