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According to the Notice on Implementing the Policy of Inclusive Tax Relief for Small and Micro Enterprises, released by the Ministry of Finance on January 17, China will expand existing preferential policies for small and low-profit enterprises to apply to a wider range of companies.
Previously, companies with annual taxable income below RMB 1 million (US$147,290) per year could benefit from a preferential corporate income tax (CIT) rate of 20 percent on 50 percent of their income, with the other 50 percent would be tax-free.
Now, such companies can enjoy the same preferential CIT rate of 20 percent but will only be taxed on 25 percent of their income, with the remaining 75 percent tax-free.
Further, companies with taxable income from RMB 1 to 3 million (US$147,290 to 441,870) can now enjoy the preferential 20 percent CIT rate on 50 percent of their income, with the other 50 percent tax-free.
According to the government, the preferential CIT rates will apply to 95 percent of corporate taxpayers and lower the total tax burden for qualified enterprises by five to 10 percent.
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