April 10 2023

Preferential CIT policies were introduced for small and micro-profit enterprises whose annual taxable income does not exceed 1 million yuan

On March 26, the Ministry of Finance and the State Administration of Taxation jointly issued a Notice on Preferential CIT policies for small and micro-profit enterprises (SMEs) and individual industrial and commercial households. The notice will be implemented from January 1, 2023 to December 31, 2024.

The Announcement makes clear that the part of the annual taxable income of small, micro-profit enterprises that does not exceed 1 million yuan shall be included in the taxable income at a reduced rate of 25%, and the enterprise income tax shall be paid at a tax rate of 20%. On the basis of the current preferential policies, individual income tax shall be levied by half on the part of the annual taxable income of individual industrial and commercial households that does not exceed 1 million yuan. We conclude the eventual preferential CIT rates for small, micro-profit enterprises are:

Taxable profit Final CIT rates Period of Validity
Total ≤ 3M 5% Valid till 31/12/2024
Total >3M 25%

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

Total assets ≤ CNY 50,000,000
Taxable Profit ≤ CNY 3,000,000
Number of employees ≤300