Announcement on Matters Relating to the Further Implementation of Preferential Policies on Individual Income Tax to Support the Development of Individual Businesses

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

Issued by: State Taxation Administration

Date of Issuance: 2023-08-02

Status: Full Text Valid

In order to carry out the Announcement of the Ministry of Finance and the State Taxation Administration on Tax and Fee Policies for Further Supporting the Development of Small and Micro Enterprises and Individual Businesses (Announcement No. 12 [2023], hereinafter simply referred to as No. 12 Announcement), and further support the development of individual businesses, relevant matters are hereby announced as follows:

I. 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. Individual businesses are eligible for the policy regardless of the method of collection.

II. Individual businesses can enjoy this policy at the time of tax prepayment, and their annual taxable income is temporarily judged according to the situation as of the end of the period to which the current declaration belongs, and will be calculated on a yearly basis, with the more refunded, the less compensated, at the time of the annual final settlement. If individual businesses obtain business income from more than two places, they are required to consolidate the annual taxable income from operation of individual businesses, to re-calculate the amount of tax exemption and to make up for the over-refund and under-refund during the annual consolidated tax return.

III. Individual businesses calculate the tax deduction in accordance with the following method:

Tax deduction = (Tax payable on the portion of taxable income from business operation not exceeding RMB2 million - Tax deductions for other policies × Portion of taxable income from business operation not exceeding RMB2 million ÷Taxable income from business operation) × 50%.

IV. Individual businesses are required to enter the amount of tax reduction or exemption calculated with the above method into the "Amount of Tax Reduction or Exemption" column of the corresponding business income tax return and to attach the Reporting Form for Individual Income Tax Deductions and Exemptions. For individual businesses that file their returns through the Electronic Tax Service, the tax authorities will provide pre-filling services for the tax exemption amount and report form of the preferential policy. For regular fixed-rate individual businesses that have implemented simplified declaration, the tax authorities will transfer the tax in accordance with the tax amount after the reduction or exemption.

V. Taxes that should be reduced according to No. 12 Announcement and have been paid before the issuance of this Announcement may be applied for a tax refund; they may also be automatically offset against the taxes of the following months, and those that are not offset in the current year will be refunded at the time of final settlement; those taxpayers that have been cancelled before the date of the issuance of No. 12 Announcement will no longer enjoy the benefits retrospectively.

VI. Tax authorities at all levels should effectively raise their political positioning, fully understand the significance of tax policy for market players to stabilize expectations, boost confidence, and arrange for investment and operation, seriously do a good job of policy publicity & interpretation and accurate counseling, provide taxpayers with a convenient and efficient channel to enjoy the policy, and actively respond to taxpayers' demands, and comprehensively promote the implementation of the policy.

VII. This Announcement shall come into force on January 1, 2023 and terminate on December 31, 2027. The Announcement of the State Taxation Administration on Matters Relating to the Implementation of Preferential Policies on Individual Income Tax for Supporting the Development of Individual Businesses (Announcement No. 5 [2023]) is repealed at the same time.

The Announcement is hereby made.

State Taxation Administration

August 2, 2023