March 2022 / China

The Ministry of Finance and the State Taxation Administration released on March 18, 2022 the Announcement on Further Implementing Preferential Income Tax Policies for Small-Micro Profit Enterprises (hereafter SMEs). The Announcement will be retrospectively implemented from January 1, 2022 to December 31, 2024.

For SMEs, we conclude the preferential CIT policies for 2022 are:

Tax declaration system will help to automatically calculate the CIT payable under the new CIT rate when you confirm the status of company as SMEs in the declaration.

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

1. taxable income amount does not exceed RMB 3 million;
2. staff headcount does not exceed 300; and
3. the total assets amount does not exceed RMB 50 million.

Once the enterprise cannot satisfy the criteria for being as SME, it has to pay CIT at 25% on full taxable profit.

China will focus on stabilizing its economic fundamentals this year, setting its GDP growth target at around 5.5 percent, Premier Li Keqiang said on Saturday, as the world's second-largest economy beefs up supportive measures to shore up growth against possible strong headwinds.

In the Government Work Report delivered at the opening of the fifth session of the 13th National People's Congress, Li said the nation will strive to create at least 11 million jobs in the urban areas and maintain surveyed urban unemployment rate at below 5.5 percent.

Li said the government has set the deficit-to-GDP ratio for 2022 at around 2.8 percent in a move to boost fiscal sustainability, while the special-purpose bonds for local government will total 3.65 trillion yuan ($1 trillion).

He pledged to step up implementation of the prudent monetary policy, saying the government will expand the scale of new loans and keep the macro leverage level generally stable.

The exchange rate of the yuan will be maintained generally stable at an adaptive, balanced level, he added.

The premier announced a new package of tax refunds and cuts totaling 2.5 trillion yuan this year to support enterprises, including a temporary exemption on value-added tax payments to small taxpayers and an additional measure to halve the cooperate income tax for micro and small businesses with an annual taxable income of 1 million to 3 million yuan.

With over 10 million college graduates expected to enter the job market this year, Li said the government will provide them with stronger policy support and uninterrupted services to ensure that they can find jobs or start businesses.

The investment from the central government budget will reach 640 billion yuan this year, and the government will make improving the people's well-being an investment priority, he said.

Source: China Daily

The Ministry of Finance and the State Taxation Administration released on March 3, 2022 the Announcement on Further Implementing the Policy of Reducing and Waiving the "Six Local Taxes and Two Fees" for Small-Micro Profit Enterprises (hereafter “SMEs”), which would be implemented during the period from January 1, 2022 to December 31, 2024.

It is clarified that people's governments of provinces, autonomous regions, and municipalities directly under the central government may, based on the actual situations of their localities, reduce the “Six local taxes and Two fees” within the tax range of 50% for VAT small-scale taxpayers, SMEs and self-employed households. The “Six local taxes and Two fees” include resources tax, urban maintenance and construction tax, property tax, urban land use tax, stamp tax (excluding stamp tax for securities trading), arable land occupation tax, as well as education surcharge, and local education surcharge. In addition, the tax cuts can be implemented together with other preferential policies.

For the purposes of this Announcement, SMEs refer to enterprises engaging in industries which are not restricted or prohibited by the State and satisfying three conditions, namely, the annual taxable income amount does not exceed CNY3 million, the staff headcount does not exceed 300 and the total amount of assets does not exceed CNY50 million.

The determination of a SME shall be based on the outcome of annual final settlement of corporate income tax. Where a newly-established enterprise registered as a general VAT payer engages in an industry which is not restricted or prohibited, and satisfies two criteria, namely, the staff headcount does not exceed 300 as at end of the preceding month for declaration period and the total assets do not exceed CNY50 million, it may, prior to its first completion of final settlement formalities, enjoy the incentives for SMEs stipulated in hereof.

The validity period of this Announcement is from 1 January 2022 to 31 December 2024.

Though China recorded surges of COVID-19 cases in several regions during the past weeks, its impact on economy is not as bad as some feared, US media outlet CNBC has reported.

Though the recent COVID-19 case hikes across China have hit record high since the initial phase of the pandemic, the infection data are still well below that of other major countries, said the report on Thursday.

Analysis from Bank of America Securities earlier this week found a muted impact from COVID-19 on supply chains, including autos and semiconductors, it said.

"The supply chain shocks are relatively light so far, but the primary economic impact is on consumer spending and the services industry," Bruce Pang, head of macro and strategy research at China Renaissance, was quoted as saying.

Besides an impact on services industries that rely on in-person and social gatherings, especially catering, the recent spread of the coronavirus suppresses people's confidence and expectations for spending, Pang said.

According to economic indicators released Tuesday by Chinese National Bureau of Statistics, retail sales for the first two months this year grew by 6.7 percent year-on-year.

The data, the CNBC said, is "a significant pickup from December and beating analysts' expectations."

China will adopt the tariff rates it has pledged under the Regional Comprehensive Economic Partnership (RCEP) agreement on part of imports from Malaysia from March 18, the Customs Tariff Commission of the State Council has said.

The new tariff rates will take effect on the same day as the world's largest deal comes into force for Malaysia, which has recently deposited its instrument of approval with the Secretary-General of the Association of Southeast Asian Nations (ASEAN).

The RCEP deal, which entered into force on Jan. 1 initially in 10 countries, will then be effective for 12 of its 15 signing members.

According to the commission's statement, the first-year RCEP tariff rates applicable to ASEAN members will be adopted on imports from Malaysia. The annual rates for subsequent years will be implemented from Jan. 1 of the respective years.

The agreement was signed on Nov. 15, 2020, by 15 Asia-Pacific countries -- 10 ASEAN members and China, Japan, the Republic of Korea, Australia and New Zealand -- after eight years of negotiations that started in 2012.

Within this trade bloc that covers nearly a third of the world's population and accounts for about 30 percent of the global GDP, more than 90 percent of merchandise trade will eventually be subject to zero tariffs.

The Chinese mainland has further expanded market access for Taiwan residents, allowing them to start individually-owned businesses in 122 sectors including cereal crop farming, fruit planting and beverage manufacturing, compared with the previous 24.

The move is the latest effort to help Taiwan residents seek employment and enjoy the development opportunities on the mainland, Zhu Fenglian, a spokesperson for the State Council Taiwan Affairs Office, told a press conference on Wednesday.

Taiwan residents are welcome to run businesses in 27 pilot areas for innovative development of service trade across the mainland, including Beijing, Tianjin, Shanghai, Chongqing, Hainan, Dalian, Xiamen, Qingdao and Shenzhen, stated a guideline released by the Taiwan affairs office, the Ministry of Commerce, and the State Administration for Market Regulation.

They will benefit from the favorable business environment in the pilot regions, and pursue better development while seizing the market opportunities on the mainland, Zhu noted.

Prior to this new policy, three documents had been unveiled in 2007, 2011 and 2015 to encourage Taiwan residents to seek self-employment on the Chinese mainland.

By the end of 2021, Taiwan residents had registered more than 10,000 self-employed businesses on the mainland.

Source: XINHUANET

The Ministry of Finance and the State Taxation Administration released on March 4, 2022 the Announcement of the Policy on Pre-tax Deduction of Taxable Corporate Income on Micro, Small and Medium-sized Enterprises for Purchase of Equipment, which clarified the specific deduction rules.

I.  Micro, small and medium-sized enterprises may voluntarily opt for pre-tax deduction at a certain percentage of the unit value of equipment and appliances that are newly purchased during the period from 1 January 2022 to 31 December 2022 with a unit value of CNY5 million or above for corporate income tax purpose. Specifically, for equipment and appliances with a minimum depreciation period of three years as stipulated in the Implementation Regulations for the Corporate Income Tax Law, 100% of the unit value of such equipment and appliances may be deducted pre-tax on a one-off basis for the current year; and for equipment and appliances with a minimum depreciation period of four, five or ten years, 50% of the unit value of such equipment and appliances may be deducted pre-tax on a one-off basis for the current year, and the remaining 50% may be depreciated in the remaining years pursuant to the provisions for pre-tax deduction.

Losses incurred by an enterprise due to shortfall for deduction in the current year where the aforesaid policy applies may be carried forward to the next five tax years; enterprises which enjoy other policies to extend the carry-forward period for losses may do so pursuant to the prevailing provisions.

II.  Micro, small and medium-sized enterprises referred to herein shall mean enterprises engaging in industries not restricted or prohibited by the State and satisfying the following criteria:

(I) the number of employees shall be not more than 2,000, or the business revenue shall be not more than CNY1 billion or the amount of total assets shall be not more than CNY1.2 billion for enterprises in the information transmission industry, construction industry, leasing and commercial service industry;

(II): the business revenue shall be not more than CNY2 billion or the amount of total assets shall be not more than CNY100 million for enterprises in real estate development; and

(III) the number of employees shall be not more 1,000 or business revenue shall be not more than CNY400 million for enterprises in other industries.

III.  For the purpose of this Announcement, the term "equipment and appliances" shall mean fixed assets other than houses and buildings; the term "number of employees of an enterprise" shall include the number of employees who have established employment relationship with the enterprise and the number of secondment workers accepted by the enterprise.

The indicators for the number of employees and total assets shall be determined based on the enterprise's quarterly average value for the year. The computation formula is as follows:

• • • Quarterly average value = (value at beginning of a quarter + value at end of a quarter) ÷ 2
    • Quarterly average value for the year = sum of each quarterly average value for the year ÷ 4

Where an enterprise commences or terminates business operation in the middle of a year, the actual business period shall be deemed as a tax year for determination of the aforesaid indicators.

IV.  Micro, small and medium-sized enterprises may enjoy the aforesaid policies at the time of declaration for prepayment on a quarterly (monthly) basis. For equipment and appliances purchased by enterprises in 2022 prior to the promulgation of this Announcement, the said enterprises may be entitled to such policies at the time of prepayment declaration and annual final settlement after the promulgation of this Announcement.

V.  Micro, small and medium-sized enterprises may opt to enjoy the aforesaid policies in light of their production and business accounting needs. In the case of not opting to enjoy the policies in the current year, they shall not change to enjoy the policies in the subsequent years.