July 2018 / China

The State Administration of Taxation recently issued the Announcement about Further Expanding the Scope of Preferential Income Tax Policies for Small Low-Profit Enterprises. According to the announcement, from January 1, 2018 until December 31, 2020, eligible small low-profit enterprises can enjoy the preferential income tax policy as long as their taxable income is no more than one million yuan. They shall pay income tax with 50% of taxable income and tax rate at 20%. If an enterprise was not eligible for the tax policy in the previous tax year, or it is a newly-established small business, and it's expected to be eligible for the tax policy at the current tax year, it can enjoy the preferential tax policy as long as its profit or taxable income for the current year is estimated to be no more than one million yuan.

The Ministry of Finance and the State Administration of Taxation recently announced the Circular about Extending the Period for High-tech Enterprises and Small and Medium-sized Technology Firms to Carry Forward Losses. According to the circular that has been effective from January 1, 2018, when a firm has been recognized as a high-tech enterprise or small and medium-sized technology firm, its business losses in the previous five years can be carried forward in as long as ten years, up from five years in the past.

The Ministry of Finance and the State Administration of Taxation recently released the Circular on the Tax Policy Relating to the Refunding of Ending Retained VAT for Some Sectors in 2018. The Circular specifies that sectors covered by the policy include advanced manufacturing such as equipment manufacturing, modern services such as R&D and power grid companies, etc., and the priorities shall be given to the following taxpayers: the taxpayer whose registered sector falls under any of the ten key areas as defined in Made in China 2025, such as the new generation of information technology, high-end CNC machine tools and robots, aerospace equipment, marine engineering equipment and high technology vessels, advanced rail transit equipment, energy-saving and new energy vehicles, electric power equipment, agricultural machinery, new materials, biomedical materials and high performance medical devices, as well as hi-tech enterprises, service enterprises with advanced technology and technological SMEs. The ending retained VAT eligible for the refunding shall be calculated based on the percentage of the taxpayer's tax retained for the previous period for which the taxpayer had applied for the refunding and the refunded amount and shall be capped at the taxpayer's retained tax at the end of 2017. The size of tax retained at the end of the period for refunding in sectors such as advanced manufacturing, modern services, etc. of various provinces in 2018 shall be subject to separate notices of the MOF and SAT, and the tax retained at the end of the period of power grid companies in various provinces shall be refunded after the calculation of the tax retained that shall be refunded for the period according to the Circular.

China will adopt a combination of fiscal and financial measures in an effort to boost domestic demand and bolster support for the real economy, according to the State Council's executive meeting chaired by Premier Li Keqiang on July 23, 2018. The meeting decided that more companies will be eligible for preferential policies of additional deduction of R&D spending in taxable income, a policy that is expected to cut another 65 billion yuan in taxes this year, on top of an initial goal of cutting taxes and fees by 1.1 trillion yuan. Companies in the advanced manufacturing and modern service industries are expected to get 113 billion yuan in value-added tax rebates before the end of September 2018. Solid implementation is urged of the re-lending policy targeting small businesses. Commercial banks will also be encouraged to issue financial bonds to these businesses with the bond issuers exempted from the requirement of continuous profit-making. Local authorities that have made visible progress in expanding financing guarantee and reducing costs for small businesses will be meaningfully rewarded.