Premier Li Keqiang said in this year’s Government Work Report that tax reductions should bring solid benefits to market bodies. As 2017 comes to an end, the State Administration of Taxation summarized the government’s performance on tax cuts.
The value-added tax (VAT) structure was streamlined, with the 13-percent tax rate being removed. A tax rate of 11 percent was applied to selling or importing goods, such as agricultural products, edible salt and natural gas.
The new VAT policy relieves burdens from many taxpayers, which was detailed in a notice released by the Ministry of Finance and the State Administration of Taxation, and was implemented on July 1, 2017.
In addition, interim VAT regulations were amended and the business tax was abolished, according to a State Council decree, which started on Nov 19, 2017.
The new regulations legalized the VAT reform results, such as streamlined tax rate and expansion of taxpayers and tax scope.
This year’s tax reduction efforts on income tax mainly benefited individuals or groups, including small and micro profit enterprises, small and medium-sized sci-tech companies, venture capital companies or angel investors, commercial health insurers, State-owned enterprises (SOEs), and service firms with advanced technology.
The upper limit of taxable income for small and micro profit enterprises was raised from 300,000 yuan ($46,044) to 500,000 yuan ($76,740), and preferences also expanded to small and medium-sized technology companies, whose research and development expenses could be deducted from their taxable income. Both policy moves are valid from Jan 1, 2017 to Dec 31, 2019.
Venture capital companies or angel investors that have invested in startups for two years can deduct 70 percent of their investment volume from their taxable income. But only those in compliance with the conditions stated in the notices released by the Ministry of Finance and the State Administration of Taxation in April and June are eligible. This policy has been piloted in Beijing-Tianjin-Hebei, Shanghai, Guangdong and five other cities and provinces, as well as Suzhou industrial park.
From July 1, 2017, the expense of purchasing qualified commercial health insurance products can be deducted from taxable income, up to 2,400 yuan a year (or 200 yuan per month). Individuals, private business owners, investors and contractors will enjoy such benefits.
For enterprises owned by the whole people that have been converted into solely State-owned enterprises (SOEs) or wholly State-owned subsidiaries, the added value generated from property assessment will not be included in their taxable income, starting on Jan 1, 2017, according to a circular regarding income tax issues during enterprises restructuring. Meanwhile, their tax bases for assets remain consistent with existing stipulations. Depreciation and amortization within the value-added portions should not deducted before tax collection.
Advanced technology service enterprises that have been recognized by related authorities at provincial levels will be eligible for the preferential income tax rate of 15 percent, according to a circular on promoting the preferential income tax policy jointly issued by the Ministry of Finance, the Ministry of Commerce, the State Administration of Taxation, the Ministry of Science and Technology, and the National Development and Reform Commission. Expenditures on training and education for staff members of such enterprises can be deducted during the calculation of taxable income if the expense does not exceed 8 percent of total wages.
Other tax incentives to promote entrepreneurship
For self-employed holders of official registration certificates for employment or unemployment, each one is entitled to a tax cut of 8,000 yuan ($1,224) per year for three years, according to two circulars jointly issued by multiple departments including the State Administration of Taxation and the Ministry of Finance regarding preferential taxation policies for entrepreneurship facilitation.
Small manufacturing entities that recruit unemployment registration certificate holders who have been unemployed for at least six months are entitled to a yearly tax cut of 4,000 yuan for each recruited position. They can enjoy the tax incentive for three years.
A demobilized soldier who starts his own business will enjoy a tax cut of 8,000 yuan per year for three years, according to a circular jointly issued by the Ministry of Finance, the State Administration of Taxation and the Ministry of Civil Affairs.
Small manufacturing entities that recruit retired soldiers with at least one-year contracts are entitled to a yearly tax cut of 4,000 yuan per person for three years.
As stipulated by a circular regarding taxation policies that support the reform of the rural collective property rights system jointly issued by the Ministry of Finance and the State Administration of Taxation, rural collective economic organizations are exempted from deed taxes for the land and properties that they have obtained ownership through the reform.