February 28 2022

China Extends Tax Relief Policy for MSMEs in Producer Services and Consumer Services

Announcement by State Council

14 authorities led by the National Development and Reform Commission jointly released on February 18, 2022 the Several Policy Measures on Boosting the Recovery of Enterprises in Difficulty in the Service Sector, which rolled out 41 policy measures aimed to help ease the difficulties of the enterprises.

According to the document, the policy for add-up deductions of value-added tax in the service sector will be extended. In 2022, taxpayers in producer services and consumer services will continue to enjoy add-up reductions of tax payable at 10% and 15% respectively for their deductible input VAT. And micro, small and medium-sized enterprises (MSMEs) will be entitled to more pre-tax deduction of costs for purchase of equipment. Specifically, MSMEs that purchase new equipment worth above 5 million yuan and with a 3-year depreciation period are entitled to a one-off deduction of total purchase costs from taxable income, or a 50 percent deduction for such purchases of equipment with a depreciation period of four, five or ten years. A firm can enjoy the tax relief on a quarterly basis, and for a loss suffered in the year but insufficient to be deducted in the year, the firm may carry it over to the following five taxable years for deduction.

Micro, small and medium-sized manufacturing enterprises refer to enterprises with annual sales of more than 20 million yuan (inclusive) but less than 400 million yuan (exclusive) (hereinafter referred to as the "medium manufacturing enterprises") and enterprises with annual sales of less than 20 million yuan (exclusive) (hereinafter referred to as the "micro and small-sized manufacturing enterprises") in the manufacturing sector under the national economic classification.