January 2019 / China

The Ministry of Finance and the State Administration of Taxation issued the Circular about Preferential Policy Arrangement after the Amendment of the Individual Income Tax law, effective from January 1, 2019.

A. Some preferential IIT regulation will be last until 2021

1- Annual Bonus The preferential IIT rate will be continued until 2021. From 1 January 2022, a resident individual who obtains annual bonus shall include the annual bonus into the consolidated income for that year for computation and payment of individual income tax. 2- Severance Payment The preferential Mehtod will be kept. 3- Expats’ Allawance During the period from 1 January 2019 to 31 December 2021, an expat who satisfies the resident individual criteria may opt to claim special additional deductions for individual income tax, or opt to enjoy tax exemption policies for subsidies and allowances such as housing allowance, language class fees, children education fee etc. The option made by a foreign individual shall not be changed within a tax year. From 1 January 2021, expats shall cease to enjoy tax exemption policies for subsidies and allowances such as housing allowance, language class fees, children education fee, and shall claim special additional deductions pursuant to the provisions.

B. Special Deduction is decided

Item	Deduction (CNY)	Note
Expenditures for education of children	1,000 / family /month /child
Continuing education	4,800 / person (diploma education) 3,600 / person (vocational qualification)
Medical treatment of serious diseases	80,000 / person /year	It shall be deducted during annual IIT filing
Housing loan interest	1,000 / family /month	These two items cannot be deduct in the same time.
Housing rents	1,000 – 1,500 / family / month
Raise of parents	2,000 among siblings / month

The State Administration of Taxation recently issued the Measures for the Administration of Tax Refund (Exemption) at Ports of Departure (Revised on December 28, 2018), to be effective from January 1, 2019. According to the document, export companies do not have to file a separate application to get registered for tax refund (exemption). When an export company makes the first application for tax refund (exemption) with the local tax agency, it will be considered to have been registered for tax refund (exemption). There are two notes for tax refund (exemption) applicants. The first is that export companies should provide "QYGTS" information when submitting the application. The second is that trade companies should use independent numbers to apply for tax refund (exemption).

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

14 authorities led by the Ministry of Commerce and the General Administration of Customs recently issued the Guidelines for Promoting High-level Opening and High-quality Development of Comprehensive Bonded Zones, and 21 specific measures and tasks were proposed to advance the high-level opening and development of comprehensive bonded zones. Li Guo, vice commissioner at the General Administration of Customs, said all newly-established special customs zones are named as comprehensive bonded zones, and existing special customs zones are making transitions to be developed into comprehensive bonded zones. Enterprises registered in the zones will be granted status as general VAT taxpayers, and they are permitted to import machines for self-use, and their customs clearance procedures will also be streamlined.