In Jan 2019, the state tax bureau announced a new set of inclusive tax cuts for small and micro businesses. After the meeting a statement was released, outlining the planned measures and emphasizing the importance of small and micro businesses to a healthy economy. The goal of these tax cuts is to ease the tax burden on these companies by saving them a total of 200 billion RMB in taxes annually.
I.Corporation income tax reduction for Small and Micro enterprises:
Small businesses with taxable income of less than 1 million RMB will see the tax rate reduced to 5 percent, and those with income above 1 million RMB but less than 3 billion RMB will have a rate of 10 percent.
According to the government statement, more than 95 percent of companies paying corporate income tax will benefit from this tax relief, and 98 percent of them are private companies.
II.Threshold reduction for VAT
The VAT threshold for small scaled-enterprises and the self-employed will be raised from 30.000 RMB to 100.000 RMB of monthly sales. Only businesses with monthly sales of more than 100.000 RMB will have to collect VAT from their customers. In another word, the quarterly sales of more than 300,000 will have duty to pay VAT.
Both measures will take effect retrospectively from January 1st 2019, and will be effective for three years.
III.More measures planned for 2019 to benefit small businesses.
Provincial governments are encouraged to grant further tax exemptions and reductions to such businesses in areas such as resources and land use for small businesses. Tax losses for the provincial governments will be compensated for by the central government by transfer payments to local authorities.
All of these measures are rolled out as the world's second biggest economy is facing headwinds, feeling the effect of the US-China trade war, among other factors slowing the economic growth. Policy makers have announced more measures to strengthen the local economy throughout the year.
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