Announcement on Tax and Fee Policies for Further Supporting the Development of Small and Micro Enterprises and Individual Businesses

Document No.: Announcement No. 12 [2023] of the Ministry of Finance and the State Taxation Administration

Issued by: Ministry of Finance and State Taxation Administration

Date of Issuance: 2023-08-02

Status: Full Text Valid

In order to further support the development of small and micro-enterprises and individual businesses, the relevant tax and fee policies are announced as follows:

I. From January 1, 2023 to December 31, 2027, individual businesses are entitled to a 50% reduction in individual income tax on the portion of their annual taxable income not exceeding RMB2 million. Individual businesses can enjoy this preferential policy on top of other existing preferential policies on individual income tax.

II. From January 1, 2023 to December 31, 2027, small-scale VAT taxpayers, small low-profit enterprises and individual businesses are entitled to a 50% reduction in resource tax (excluding water resource tax), urban maintenance and construction tax, property tax, urban land-use tax, stamp duty (excluding stamp duty on securities transactions), cultivated land occupation tax, educational surcharges and local educational surcharges.

III. Small low-profit enterprises calculate their taxable income at a reduced rate of 25% and pay enterprise income tax at a rate of 20%, and this policy is extended till December 31, 2027.

IV. Small-scale VAT taxpayers, small low-profit enterprises and individual businesses are entitled enjoy the preferential policies stipulated in Article II of this Announcement additionally if they have already enjoyed other preferential policies in terms of the resource tax, urban maintenance and construction tax, property tax, urban land-use tax, stamp duty, cultivated land occupation tax, educational surcharges and local educational surcharges.

V. The small low-profit enterprises referred to in this Announcement refer to those enterprises engaged in non-restricted and non-prohibited industries in the country, and simultaneously meeting the three conditions that the annual taxable income does not exceed RMB3 million, the number of employees does not exceed 300, and the total amount of assets does not exceed RMB50 million.

The number of employees includes the number of workers who have established a labor relationship with the enterprise and the number of workers accepted by the enterprise for labor dispatch. The number of employees and total amount of assets shall be determined as per the quarterly average of the enterprise for the whole year. The specific calculation formulas are as follows:

Quarterly average = (The value at the beginning of the quarter + The value at the end of the quarter) ÷ 2

Quarterly average for the year = Sum of quarterly averages for the year ÷ 4

If the business is opened or terminated in the middle of the year, the actual period of operation shall be used as a tax year to determine the above relevant indicators.

The determination of small low-profit enterprises is based on the results of the annual final settlement of enterprise income tax. For newly-established enterprises registered as general VAT taxpayers, if they are engaged in industries not restricted or prohibited by the country, and simultaneously meet the two conditions that the number of employees is not more than 300 and the total amount of assets is not more than RMB50 million at the end of the last month of the declaration period, they may file a declaration as small low-profit enterprises to enjoy the preferential policies stipulated in Article II before the first handling of the final settlement.

VI. The relevant taxes levied before the date of publication of this Announcement may be offset against the tax payable by the taxpayers in the following months or be refunded. If the taxpayers have been canceled before the date of publication, this policy shall not be enjoyed retroactively.

The preferential policies on income tax for individual businesses in the Announcement of the Ministry of Finance and the State Taxation Administration on the Further Implementation of the Policy of Reducing and Exempting "Six Taxes and Two Fees" for Small and Micro Enterprises (Announcement No. 10 [2022] of the Ministry of Finance and the State Taxation Administration) and the Announcement of the Ministry of Finance and the State Taxation Administration on Preferential Policies on Income Tax for Small and Micro Enterprises and Individual Businesses (Announcement No. 6 [2023] of the Ministry of Finance and the State Taxation Administration) will be discontinued as from January 1, 2023, accordingly.

The Announcement is hereby made.

State Taxation AdministrationMinistry of Finance

August 2, 2023