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 |