March 31 2022

Authorities Unveil New Preferential Income Tax Policies for Small Enterprises

Announcement by State Taxation Administration (STA)

The Ministry of Finance and the State Taxation Administration released on March 18, 2022 the Announcement on Further Implementing Preferential Income Tax Policies for Small-Micro Profit Enterprises (hereafter SMEs). The Announcement will be retrospectively implemented from January 1, 2022 to December 31, 2024.

For SMEs, we conclude the preferential CIT policies for 2022 are:

Taxable profit Specification Final CIT rates Period of Validity
Total ≤ 3M Portion ≤ 1M 2.5% Valid till 31/12/2022
Portion>1M but ≤ 3M 5% Valid till 31/12/2024

Tax declaration system will help to automatically calculate the CIT payable under the new CIT rate when you confirm the status of company as SMEs in the declaration.

SMEs shall mean enterprises engaging in non-restricted and non-prohibited businesses, which satisfy the three criteria simultaneously:

  1. taxable income amount does not exceed RMB 3 million;
  2. staff headcount does not exceed 300; and
  3. the total assets amount does not exceed RMB 50 million.

Once the enterprise cannot satisfy the criteria for being as SME, it has to pay CIT at 25% on full taxable profit.