Welcome to another episode of Do The Right Thing: Work & Business in China, a series of videos explaining important work and business know-how related to your life in China.
In the video we explain the most recent tax breaks announcement. These new preferential tax cuts are put in place immediately to help small businesses during a time of uncertainty due to the recent COVID outbreaks, which are the worst since the beginning of 2020.
VAT – Sales Tax
Small scale business tax payers, with less than 5 million RMB in annual sales, will see further VAT reductions. From 2020, VAT for such companies was exempt if quarterly sales were lower than 450k RMB, and then 1% if sales were over this amount. Starting April 2022, small business VAT will be totally exempt. However, for “special VAT” invoices, the tax will still be 3%.
CIT – Profit Tax
Another reduction is given to small companies with their corporate income tax. For the first 1 million of annual profit, CIT stays at 2.5% as it was since 2020, but for the 1-3 million annual profit brackets, the CIT tax is reduced from 10% to 5%.
New IIT Deduction Item
To help employees reduce their income tax burden, there is a small change to the individual income tax deduction policy. In the past, kids education expense deduction didn’t include kids under 3 years old. However, as of now, employees can deduct 1000 RMB per month per child under the age of 3.
This new tax alleviation is a good start and shows the effort made by the authorities to help small companies, and thus help the country’s economy. However, many small business owners are waiting for further aid with anticipation.