As the world markets struggle to find a return to normality, China has had to make concessions to SMEs to help them keep business operations going. Like most countries worldwide, SMEs are the backbone of any strong economy. Still, the new policies are also helpful for entrepreneurs in startups in China’s manufacturing industry struggling with cash flow.
China has extended preferential tax policies, including deferring taxes and surcharges for up to six months to reduce taxes for SMEs and self-employed up to 50%. In some cases, these tax benefits can be added to other benefits already implemented in the business.
Deferred taxes and surcharges for six months
To promote steady growth for China’s industrial economy and support the development of the small, medium, and micro-enterprises in the manufacturing industry, the State Tax Administration and the Ministry of Finance have decided to extend the deferral of some taxes.
The qualification for extending or applying deferrals are as translated below:
- For taxes in the fourth quarter of 2021 that have been deferred, the deferment period will be extended for another six months
- Postponement of some taxes for the first and second quarters of 2022
- Qualified medium enterprises (annual turnover is between 20 million RMB to 400 million RMB) are allowed to defer 50% taxes payment, and eligible small and micro enterprises (annual turnover is below 20 million RMB) are permitted to defer 100% tax payments for six months
- Taxes that can be deferred include CIT, IIT, VAT, CT and surcharges
- For enterprises qualified to defer their 2021 fourth quarter taxes, if they need to pay extra taxes when doing annual filing, the payment is also allowed to be deferred
Recommendation
These policies can bring respite to many businesses in the manufacturing industry, but there are also possibilities for other SMEs in other sectors to potentially enjoy partial or complete benefits.
In any case, the best way to enjoy the benefits is to either talk to the tax bureau and request how to apply for such tax deferrals or to get in touch with a tax expert to enquire and apply them immediately.
During difficult economic times, cashflow should always be the most critical focus point of companies, and the deferral of taxes is a large aid to buffering this.
50% tax and surcharge reductions for small low-profit enterprises
Small and self-employed enterprises could enjoy up to 50% deduction on resource tax, urban maintenance tax, real estate tax, urban land use tax, stamp duty (excluding securities transaction stamp duty), cultivated land occupation tax and education surcharge, and local education surcharge.
However, to enjoy these reductions, the enterprises have to prove that they are low-profit and small-scale to the local authorities in the province, autonomous regions, and municipalities to gain approval to enjoy the benefit.
Fortunately, taxpayers who already enjoy other preferential treatments on the taxes or surcharges mentioned above can enjoy the deduction on top of the preferential treatments they are entitled to now.
Recommendation
Benefits like these are beneficial for struggling businesses. Still, there needs to have some level of communication and familiarity with the local authorities, which small or self-employed enterprises might not have the time to cultivate.
For that reason, it is best to approach tax experts like Acclime to negotiate with the local authorities on the enterprises’ behalf as they have matured these vital relationships beforehand.
If one were to try to get these tax reductions alone, the best advice is to collect and bring all relevant and potentially relevant documents regarding tax filings and receipts. Going prepared with all documents allows the authorities to see goodwill and transparency, hopefully increasing the likeliness to approve the reduction.
Get in touch with your tax expert
There are many issues that businesses can face when trying to implement these policies and incentives alone. In most cases, the tax expert is happy to assist in implementing these policies, however, in some cases, it might not be favourable for the business’s long-term operation, and the expert can advise for a better course of action.
Hence it might be best to contact us at infochina@acclime.com to review your case and devise the best plan for your situation.
