TAX UPDATE

Find below our latest tax news to stay informed on tax policies impacting your company in China

 

 

Summary:

1)      Preferential VAT Policy for Small-scale Taxpayers

2)      Preferential CIT Policy for Small and Low-profit Enterprises

3)      VAT extra deduction policy for taxpayers providing productive service or living service

4)      Extra deduction of R&D expenses

5)      Reduction of Six Taxes and Two Fees for Small-scale Taxpayers and Small and Low-profit Enterprises

6)      IIT preferential policy for allowances of foreigners and bonus

7)      CIT settlement deadline

8)      IIT settlement deadline

 

 

Preferential VAT Policy for Small-scale Taxpayers

 

1)      From January 1^st, 2023 to December 31^st, 2023, small-scale VAT taxpayers with monthly sales of no more than 100,000 yuan will be exempted from VAT.

 

2)      From January 1^st, 2023 to December 31^st, 2023, for small-scale VAT taxpayers with monthly sales of more than 100,000 yuan and subject to VAT rate of 3%, the VAT rate will be reduced to 1%.

 

Preferential CIT Policy for Small and Low-profit Enterprises

 

From January 1^st 2023, for the portion of the annual taxable income of small and low-profit enterprises that does not exceed 1 million yuan, the taxable income shall be reduced at 25% of its actual amount, and the enterprise income tax shall be paid at a tax rate of 20%.

 

The above announcement means that for the portion of profit which doesn't exceed 1 million of RMB , the tax burden will be 5%.

 

Combining current valid EIT policy for taxable income of small and low-profit enterprises that exceeds 1 million but does not exceed 3 million (for which CIT burden is also 5%), the tax burden for taxable income which does not exceed 3 million will be 5% (this rule will expire on December 31^st 2024).

 

VAT Extra Deduction Policy for Taxpayers Providing Productive Service or Living Service

 

1)      From January 1^st, 2023 to December 31^st, 2023, taxpayers of production service are allowed to deduct the input VAT by an additional 5% on the deductible input VAT amount for the current period.

 

Note:

 

-        Production service taxpayers refer to taxpayers whose sales for the provision of postal services, telecommunication services, modern services and living services account for more than 50% of the total sales.

 

-        Modern services include research and development and technical services, information technology services, cultural and creativity services, logistics support services, leasing services, consulting and authentication services, radio and television services, business support services and other modern services. )

 

2)      From January 1^st, 2023 to December 31^st, 2023, taxpayers of living service are allowed to deduct the input VAT by an additional 10% on the deductible input VAT amount for the current period.

 

Note:

 

-        Living service taxpayers refer to taxpayers whose sales from the provision of living services account for more than 50% of the total sales.

 

-        Living services include cultural and sports services, education and medical services, tourism and entertainment services, catering and accommodation services, residents' daily services and other living services.

 

Extra Deduction of R&D Expenses

 

Since January 1st 2023, for R&D expenses actually incurred in carrying out research and development activities, where intangible assets have not been formed and included in the profits and losses of the current period, 100% extra of the actually incurred amount are allowed for pre-tax deduction on the basis of actual amount; where intangible assets have been formed, amortization shall be based on 200% of the costs of the intangible assets before tax.

 

Reduction of Six Taxes and Two Fees for Small-scale Taxpayers and Small and Low-profit Enterprises

 

From January 1, 2022 to December 31, 2024, small-scale value-added tax taxpayers, small low-profit enterprises, and individual businesses will be subject to a 50% reduction in resource tax, urban maintenance and construction tax, property tax, urban land occupation tax, stamp duty, farmland occupation tax, education surcharge, and local education surcharge.

 

IIT Preferential Policy for Allowances of Foreigners and Bonus

 

Foreign individuals shall continue 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 till the end of 2023.

 

The annual lump sum bonus shall continue to enjoy the IIT preferential policy till the end of 2023. An individual can choose to include annual lump sum bonus in the annual salary income, or to calculate IIT for lump sum bonus separately.

 

CIT Settlement Deadline

 

The deadline of 2022 CIT settlement is May 31^st 2023.

 

IIT Settlement Deadline

 

The deadline of 2022 IIT settlement is June 30^th 2023.