To carry out the Announcement of the Ministry of Finance and the State Taxation Administration on the Implementation of Preferential Income Tax Policies for Micro and Small Enterprises and Individual Industrial and Commercial Households (Announcement No. 12 [2021]), and further support the development of small low-profit enterprises and individual industrial and commercial households, related matters are hereby announced as follows now:

I. Matters concerning the policy of half reduction of income tax for small low-profit enterprises

(I) The part of small low-profit enterprises’ annual taxable income not exceeding RMB1,000,000 shall be recorded in the taxable income based on the reduced 12.5%, and for this part, the enterprise income tax shall be paid at the tax rate of 20%.

(II) The specific issues of collection and management involved when small low-profit enterprises enjoy the above-mentioned policies shall be implemented in accordance with relevant provisions of the Announcement of the State Administration of Taxation on Issues Concerning the Implementation of the Inclusive Income Tax Deduction and Exemption Policies for Small Low-Profit Enterprises (Announcement No. 2 [2019]).

II. Matters concerning the policy of half reduction of individual income tax for individual industrial and commercial households

(I) For the part of individual industrial and commercial households’ annual taxable income not exceeding RMB1,000,000 from business operation, the individual income tax shall be further half reduced on the basis of the existing preferential policy. This preference can be enjoyed by all individual industrial and commercial households without distinguishing the method of collection.

(II) Individual industrial and commercial households can enjoy this preference when prepaying taxes, and the annual taxable income will be judged temporarily according to the situations at the end of the period to which the current filing belongs, and calculated by year, with the balances paid to either side as the case may be. If individual industrial and commercial households obtain business income from two or more places, then when filing annual tax returns, they need to combine their annual taxable income from business income and recalculate the amount of tax deductions, and pay the balances to either side as the case may be.

(III) The amount of tax reduction and exemption for individual industrial and commercial households shall be calculated with the following method:

The amount of tax reduction and exemption =(The tax amount payable for the part of individual industrial and commercial households’ taxable income not exceeding RMB1,000,000 from business operation × The part of individual industrial and commercial households’ taxable income not exceeding RMB1,000,000 from business operation ÷The taxable income from business operation)×(1-50%)

(IV) Individual industrial and commercial households shall fill out the amount of tax reduction and exemption calculated with the above-mentioned method in the column “amount of tax reduction and exemption” of the Business Income Tax Return, and submit the Report of Matters Concerning Individual Income Tax Reduction and Exemption as an attachment. For individual industrial and commercial households carrying out tax return filing through Electronic Tax Service, tax authorities will provide the service to pre-fill out the amount of tax reduction and exemption under the preferential policy and the report. For individual industrial and commercial households carrying out simple regular and fixed-amount tax return filing, tax authorities will transfer tax payments according to the tax amount after reduction and exemption.

III. Matters concerning the cancellation of pre-collection of individual income tax for transport invoices issued on an agency basis

For individual industrial and commercial households, sole proprietorship enterprises, partnership enterprises and individuals, individual income tax won’t be precollected any more for transport invoices issued on an agency basis. The owners of individual industrial and commercial households, investors of sole proprietorship enterprises, individual partners of partnership enterprises, and other individuals engaged in the operating activities of cargo transport shall file tax returns of and pay individual income tax on business income independently according to law.

IV. Implementation time and other matters

Article I and Article II of this Announcement shall be implemented from Jan. 1, 2021 to Dec. 31, 2022. Where individual industrial and commercial households have paid the individual income tax on business income for the period after Jan. 1, 2021 and before issuance of this Announcement, the paid individual income tax may be used to offset the taxes of future months automatically, and the part not offset in the present year may be refunded during the final settlement; and you may also directly apply for the refund of the tax which should be reduced or exempted. Article III of this Announcement shall be implemented since April 1, 2021.

Where Article 1 of the Announcement of the State Administration of Taxation on Issues Concerning the Implementation of the Inclusive Income Tax Deduction and Exemption Policies for Small Low-Profit Enterprises (Announcement No. 2 [2019]) is inconsistent with this Announcement, this Announcement shall prevail. The Announcement of the State Taxation Administration on Issues Concerning the Pre-collection Rate of Individual Income Tax for Transport Invoices Issued on an Agency Basis (Announcement No.44 [2011] of the State Administration of Taxation) shall be abolished at the same time.

It is announced specially here.

State Taxation Administration
April 7, 2021