Details of the Policy
From January 1 to December 31 in 2023, small-scale taxpayers with monthly sales of less than RMB 100,000 (including this amount) shall be exempt from Value-added Tax. For taxable sales income of small-scale taxpayers, the levy rate will be 3%, and levied at 1%. The pre-payment of Value-added Tax items for small-scale taxpayers shall also be calculated to a 3% advance levy rate and levied at 1% pre-levy rate.
This new policy provides a significant benefit to small-scale taxpayers, offering them a reduction in the amount of Value-added Tax they pay on their sales income. This will help small businesses to stay competitive and encourages economic development in China.
What Companies are Eligible for Tax Cuts?
Small and medium-sized enterprises (SMEs) with sales volumes of under 100,000CNY peer month are eligible for this policy. To qualify as a small-scale taxpayer, the criteria are:
1. Monthly sales of less than 100,000 RMB;
2. Evidence of registration with the State Administration of Taxation; 3. Compliance with other relevant tax laws and regulations in China.
What qualifies as an SME in China?
In China, an SME (small and medium-sized enterprise) is defined as a non-publicly listed company with a certain level of employee headcount, annual revenue, or total assets. The exact definition of an SME can vary depending on the specific government agency or industry group, but typically SMEs are defined as having less than a certain number of employees and/or less than a certain amount of annual revenue or total assets.
For example, The Ministry of Industry and Information Technology of China (MIIT) defined the SMEs as the companies with independent legal person, the total assets of which are not more than RMB 100 million, and the annual sales income does not exceed RMB 300 million.
That being said, The classification criteria for SMEs may change from time to time. The classification criteria for SMEs are generally determined by the Chinese government in order to provide special policy support and services to SMEs.
What qualifies as a small-scale taxpayer in China?
a small-scale taxpayer is defined as a business that meets certain criteria in terms of annual taxable sales revenue and/or number of employees. The exact criteria for small-scale taxpayer classification can vary depending on the specific government agency or industry group.
The Ministry of Finance of China (MOF) generally defines a small-scale taxpayer as a business with taxable sales revenue of no more than RMB 5 million per year, or with no more than 30 employees.
The National Bureau of Statistics of China (NBS) also have a definition of small-scale taxpayers, It defined it as the business unit which sales revenue of the current year is not more than RMB 20 million, and the number of employees is not more than 100.
Benefits of the New Tax Concession Policy
The new tax concession policy will benefit small-scale taxpayers by reducing their Value-added Tax burden and helping them remain competitive in the market. This will ensure small businesses can continue to thrive, boosting China’s economy overall. The policy also encourages small businesses to invest in new technology and equipment as they are now more able to afford it.
In addition, small businesses may be better able to access capital through loans or investments due to their reduced tax liability, which could help them grow further. The policy is aimed at promoting economic development across China and enabling small businesses to contribute a larger share of the country’s GDP.
With the opening up of China’s economy, small businesses can benefit from the additional capital they receive through the reduced tax burden. This could help small businesses expand their operations and create more job opportunities in local communities.
We encourage small-scale taxpayers to contact the relevant government agencies for further information about how to take advantage of this new policy.
