China to Further Cut over RMB550 Billion in Taxes in 2021 to Support MSEs, Individually-Owned Businesses and Advanced Manufacturing Enterprises

Source:Organizing_Committee    |      Date:2021-04-07

  The executive meeting of the State Council held on March 31 ratified the tax relief policy for micro and small enterprises (MSEs), individually-owned businesses and advance manufacturing enterprises. This marks another tax cut policy following the State Council’s decision to raise the extra tax deduction on manufacturing enterprises’ R&D expenses. The latest policy, coupled with existing ones, is expected to further reduce over RMB550 billion in taxes this year.

  The meeting decided to scale up income tax cut for MSEs and include individually-owned businesses in the tax relief policy. On the basis of preferential policies already in force, the income tax of MSEs and individually-owned businesses on annual taxable income below RMB1 million will be halved from January 1, 2021 to the end of 2022.

  From April 1, 2021 to the end of 2022, the value-added tax (VAT) threshold for small-scale taxpayers including MSEs and individually-owned businesses will be raised from RMB100,000 to RMB150,000 in monthly sales.

  All due VAT credits to advanced manufacturing enterprises such as transportation equipment, electrical machinery, instrumentation, pharmaceutical and chemical fiber will be refunded on a monthly basis, starting April 1 this year.

  The meeting stressed that in addition to the policy relief policies, growth in non-tax government revenue should be contained rationally, and tough steps should be taken to end arbitrary charges to light the burden on businesses.

  Improving the business environment is crucial to China’s economic development and is also an important reform measure China has beefed up in recent years. The 2020 China International Fair for Trade in Services (CIFTIS), themed “Global Services, Shared Prosperity”, was held in Beijing from September 4 to 9, 2020. At the China International Finance Annual Forum 2020 held during the Fair, Zhang Xiaohui, Dean of Tsinghua University PBC School of Finance, said that in response to the economic recession brought about by the pandemic, the Chinese government had not turned to the massive quantitative easing and fiscal deficit policies as the United States and European countries did but focused its policies on pandemic prevention and control to help enterprises resume operation as soon as possible. It has adopted relatively moderate fiscal and monetary policies and structural policies, such as tax reduction and credit policies in support of enterprises, especially small and medium enterprises. Well-designed social and public policies, along with moderate fiscal deficit and monetary easing policies, have proved effective in promoting economic recovery.

  Noting the importance of steady economic recovery to job growth, Zhang said that what matters more is the optimization of economic structure, industrial upgrading, and improvement of development quality. In addition, it is also essential that private capital is extensively and profoundly involved in economic development, with the competitive neutrality principle implemented effectively and an enabling environment created for private enterprises and small and medium enterprises which are the mainstay in keeping employment stable.

  In the face of the massive impact unseen in a hundred years, we should stick to the path of high-quality development, push forward reform, continuously improve productivity, and focus on creating new areas of growth to replace old growth drivers. We should continue to expand opening-up, integrate into the global economy at a deeper level, and foster a competitive market. In doing so, we can turn crises into opportunities and achieve sustained and sound growth for the long term.