February 2019 / China

The 13th National People's Congress opened its second session on March 5, 2019 in Beijing. Premier Li Keqiang delivered a report on the government work, and he said China would implement a larger scale of tax reductions in 2019. He said China will introduce both general-benefit and structural tax cuts, focusing primarily on reducing tax burdens on the manufacturing sector and on small and micro businesses. China will reduce the current value-added tax rate of 16 percent for manufacturing and other industries to 13 percent, and lower the rate for such industries as transportation and construction from 10 percent to 9 percent. Supporting measures, like increased tax deductions for producer and consumer services, will be taken to make sure that tax burdens in all industries do not go up.

China has set its GDP growth target at 6-6.5 percent for 2019, said Premier Li Keqiang when he delivered a government work report at the opening meeting of the annual legislative session. He said state-owned larger commercial banks must increase loans to small and micro firms by at least 30% this year, and China will reduce the tax burdens and social insurance contributions of enterprises by nearly 2 trillion yuan this year. China will announce more targeted reductions to required reserve ratios for small and medium-sized banks, and capital unleashed from these measures will be used to meet financing needs of small and private companies. Large banks are encouraged to replenish capital through different means and increase medium and long-term credit supply to the manufacturing sector. The country will lower the share borne by employers for urban workers' basic aged-care insurance, and local governments may cut contributions down to 16 percent, but they must ensure that small firms' social security payments will not be increased.

The Ministry of Finance, the State Administration of Taxation and the People's Bank of China recently issued the Circular on Further Strengthening Management on Handling Fees for Commissioned Collection of Taxes. The circular stipulates the scope of commissioned collection of taxes, and states that tax agencies shall pay handling fees of no more than 2% of the commissioned tax collections, and payment of handling fees to a single tax withholding agent is capped at 700,000 yuan a year.

The State Administration of Taxation recently issued its Announcement on Expanding the Scope of the Pilot Program of Allowing Small-scale Taxpayers to Issue Their Own Special Value Added Tax Invoices, with effect from March 1, 2019. According to the circular, all general taxpayers will be qualified to be exempt from the VAT invoice verification requirement, and small-scale taxpayers that are allowed to produce their own special VAT invoices will be further expanded to cover those specializing in the leasing and commercial services, science research and technical service, household services, repair and other sectors in addition to the previous accommodation, authentication and consulting industries, construction, industry, information transmission, software and IT sectors.