October 2022 / China

The Ministry of Finance ("MOF"), together with the State Taxation Administration ("STA") and the Ministry of Science and Technology ("MOST"), released on September 26, 2022 the Announcement on Increasing Pre-tax Deduction to Support Scientific and Technological Innovation.

It is clarified that hi-tech enterprises are allowed to make one-off deduction of their full cost for purchase of new equipment and instruments during the period from October 1, 2022 to December 31, 2022 in calculation of taxable income for the current year, and are also allowed to make 100 percent of pre-tax additional deduction. The policy is applicable to all enterprises that are qualified as hi-tech ones in the fourth quarter of 2022. If a qualified enterprise chooses to apply the policy in the current year but the cost does not reach the deductible amount, it can be carried over to following years for deduction according to existing rules.

The Ministry of Finance ("MOF") released on September 26, 2022 the Announcement on Continuing Tax Exemptions on Purchases of New Energy Vehicles, which was jointly formulated by the MOF, the State Taxation Administration ("STA") and the Ministry of Industry and Information Technology ("MIIT").

Purchases of new energy vehicles ("NEVs") during the period from January 1, 2023 to December 31, 2023 will be exempted from purchase tax. NEVs exempted from purchase tax would be subject to management based on the List of NEV Models Exempted from Purchase Tax, which was released by the MIIT and the STA and has been updated to its 58th batch, according to the Announcement, which also continues tax exemptions on purchases of NEVs that have been included in the List before December 31, 2022, and requires handling of other matters in accordance with No.21 Announcement in 2020 and No.13 Announcement in 2021.

The State Council introduced three phased tax reduction policies to support corporate innovation at the executive meeting held on September 7, 2022. The Ministry of Finance ("MOF") and other two authorities clarified two of the policies in their No.28 (2022) Announcement. The MOF and the State Taxation Administration ("STA") jointly released on October 8, 2022 the supporting document for the third policy.

According to the Announcement of the Ministry of Finance and the State Taxation Administration on the Preferential Tax Policy for Corporate Investment in Basic Research, corporate investments in non-profit scientific and technological R&D institutions, colleges and universities, and government natural science funds for basic research are eligible for pre-tax deduction of the actually incurred amount in the calculation of the taxable income, as well as 100 percent pre-tax additional deduction. The income of non-profit scientific research institutions, and colleges and universities from basic research funds received from enterprises, individuals and other organizations will be exempted from the enterprise income tax.

The Shanghai Municipal People's Government released on October 21, 2022 the Guidelines of Shanghai Municipality on Promoting the Stable and Quality Growth of Foreign Trade, to be effective on November 1, 2022.

The Guidelines rolled out 22 policy measures in five aspects, including ensuring the stable operation of foreign trade firms, increasing financial service support for international trade, optimizing import and export structure of foreign trade, supporting the development of new forms and modes of foreign trade, and strengthening the service guarantee for foreign trade firms.

It called for facilitating export tax rebate, cutting average processing time of normal export tax rebate (exemption) for exporters subject to Category I and Category II export rebate management to three working days, expanding the coverage of the pilot program of waiving the requirement for filling out the forms for export tax rebate, and promoting the sharing of export information of enterprises at different ports through the "single window" of the Shanghai international trade. It is also required to promote the mutual recognition of the results for the evaluation of enterprises eligible for export tax rebate in the Yangtze River Delta region by Relying on the cooperation mechanism for regional integration in the Yangtze River Delta.

The Shanghai Municipal People's Government released on September 28, 2022 the Several Policy Measures of Shanghai Municipality for Helping Industries, Enhancing Market Entities and Stabilizing Growth, stepping up support in incentives, subsidies and credit support to beleaguered sectors, small businesses and major industries.

While continuing the subsidies and tax cuts offered to culture, tourism, sports, exhibition, aviation, life services and other sectors that have been in trouble due to the COVID-19 pandemic, Shanghai also strengthened support to micro and small enterprises, small and middle enterprises focusing on specialized areas or with distinctive advantages in select areas, high-tech companies, and high-quality players. According to the document, the government said it would also vigorously promote consumption of big-ticket items, such as housing and automobiles and build more affordable housing for rental, and raised the limit of funding support for major technical upgrading in key industries to 100 million yuan and lowered medical insurance contributions made by employers by 0.5 percentage points. In addition, in the document the government also explored the possibility of optimizing risk compensation for loans, as well as interest or fee discount.

In the document, the government also stressed the need to ensure prompt implementation of preferential taxation policies. Tax rebates for exports should not take more than five business days to process. Specifically, it should take exporters not more than three business days to go through procedures for tax rebates, and VAT credits shall be immediately refunded to manufacturers upon application and arrive at the recipient's account within two business days.

It is the clearest signal from state media about China's policy direction amid recent outbreaks in many parts of the country.

The article points out that only when the epidemic is prevented can the economy be stable, people's lives be safe, and economic and social development be stable and healthy. The adherence to "dynamic zero elimination" has better balanced the relationship between epidemic prevention and control and economic and social development, enabling us to achieve the maximum prevention and control effect at the minimum cost and minimize the impact of the epidemic on economic and social development. When all is said and done, our containment measures are the most economical and effective.

It should be noted that "dynamic zeroing" does not mean to pursue zero infection, but to find and extinguish each case, so as to prevent the spread of the novel coronavirus in the place where the epidemic occurs and prevent the spread of the virus to other areas. This means that, on the one hand, we should not relax the prevention and control of the epidemic and "let it go". On the other hand, we should also be vigilant against excessive epidemic prevention and control, and resolutely prevent the phenomenon of simplification, one-size-fits-all, and layer upon layer. To achieve dynamic zero elimination, we must continuously improve the level of scientific and precise prevention and control.

The article emphasizes at the end that we must unswervingly adhere to the overall strategy of "preventing imports from abroad and preventing rebound at home" and the general policy of "dynamic zero elimination", constantly optimize prevention and control policies and measures in light of the circumstances, and efficiently coordinate epidemic prevention and control with economic and social development.

China will unswervingly expand all-around opening up and push economic globalization toward being more open, inclusive, balanced and beneficial to all, an official with the country's top economic planner said Monday.

There has been misunderstanding about the new pattern of development that is focused on the domestic economy and features positive interplay between domestic and international economic flows, Zhao Chenxin, deputy director of the National Development and Reform Commission, told a press conference on the sidelines of the ongoing 20th National Congress of the Communist Party of China.

He said it is wrong to think that by focusing on the domestic economy China will scale back its opening-up efforts or even turn to a "self-sufficient economy," said Zhao.

Economic globalization has become an irreversible trend, he said, adding that China is already deeply integrated into the global economy and the international system, and the industries of China and many other countries are highly interconnected and interdependent.

He said fostering a new pattern of development is important for China to achieve development that is of higher quality and is more efficient, fair, sustainable and secure.

China will open its door wider to the rest of the world, Xi Jinping, general secretary of the Communist Party of China Central Committee, said on Oct 23.

"We'll be steadfast in deepening reform and opening-up across the board, and in pursuing high-quality development," Xi said when meeting the press at the Great Hall of the People, noting that a prosperous China will create many more opportunities for the world.

Just as China cannot develop in isolation from the world, the world needs China for its development, Xi said.

Through over 40 years of relentless reform and opening-up, China has created the twin miracles of fast economic growth and long-term social stability, he said.

The Chinese economy has great resilience and potential, Xi said. "Its strong fundamentals will not change, and it will remain on the positive trajectory over the long run".