China continues the trend of tax and fee reduction

published on January 30, 2019 | reading time approx. 2 minutes

Recently, the State Council of China announced that it will implement a series of new tax incentives. The recent National Tax Work Conference also released a positive signal on tax cuts and fee reductions. Shortly afterwards, the State Administration of Taxation (SAT) officially announced the incentives, especially for small and micro enterprises (SME) with thin profits.

Tax Benefits for Small Enterprises with Thin Profits

The latest tax policies for SMEs are summarized in the following table:

By comparing the regulations, it can be found that in addition to the measures to reduce the tax burden, the scope of the preferential policies has also been expanded through the new incentives. It is to note that the implementation period of the incentives is set at 3 years, which take effect from January 1, 2019 till to December 31, 2021.

Other Tax Reduction Measures

Besides publishing new regulations, recently the Chinese government has also indicated the orientation of China's tax reduction measures in 2019 through various channels. In addition to the above mentioned tax incentives for SMEs, it also includes the following three aspects:

Continuation of the VAT reform
Full implementation of the new Individual Income Tax (IIT) law and the special additional deduction
Research on plans for reducing social insurance

In addition to the new IIT law that has already been formally implemented, the issues of VAT reform and the reduction of social security have already been discussed for some time. The takeover of social security collection by tax authority, which was originally planned to be implemented in 2019, has also been suspended. Considering the current signals, it is believed that the changes and adjustments of these regulations are already concretized but not yet published.

Outlook

Since 2018, “tax and fee reduction” has gradually become a policy that the Chinese government has vigorously promoted. With a series of tax incentives are announced at the beginning of 2019, it shows that this trend will continue this year. It can be expected that the tax reduction measures will be mainly focused on SMEs, and the VAT and IIT reform will continue to deepen the reduction of burden on taxpayers to a greater extent. Whether there will be new changes regarding supporting measures such as tax declaration and collection will also be worthy of attention.