January 31 2019

China Unveils Five Tax-reduction Measures for Small and Micro Firms

Premier Li Keqiang chaired a State Council executive meeting on January 9, 2019. The meeting decided to unveil larger-scale tax cuts and tax exemptions for micro and small enterprises.

The eligibility of small and low-profit businesses to benefit from preferential corporate tax will be significantly expanded, and deeper cuts on corporate tax will be introduced. Small and low-profit businesses with an annual taxable income of less than 1 million yuan and between 1 million and 3 million yuan will be eligible to have their tax calculated based on 25 percent or 50 percent of their taxable income. This is expected to reduce tax burdens of such enterprises to 5 percent and 10 percent. The adjusted tax incentives are expected to cover 95 percent of corporate taxpayers, 98 percent of which will be private businesses. At the same time, VAT threshold on small-scale tax payers, which mainly includes MSEs and individual businesses and other types of individuals, will be raised from 30,000 yuan to 100, 000 yuan of monthly sales. The tax incentives will cover all taxes incurred since January 1, 2019, and will be effective for a tentative term of three years. They are expected to save about 200 billion yuan for small and micro businesses every year.


Profit Taxable amount Actual Tax rate
No more than 1M 25% 5%
More than 1M and no more than 3M For 1M part, 25% 5%
For 1M to 3M part, 50% 10%


Eg, Company A made profit CNY 2,000,000 in 2019. A meets the requirement of SME. A’s CIT is:


1,000,000 *25% *20% + (2,000,000 – 1,000,000) *50% *20% = 150,000