China's Ministry of Finance (MOF) and the State Administration of Taxation (SAT) jointly released on July 11, 2018 the "Circular on Further Expanding the Coverage of the Preferential Income Tax Policy for Small Low-profit Enterprises" Caishui  No. 77.
In order to further support the development of the small low-profit companies, the Circular No. 77 provides that during the period starting from January 1, 2018 and ending in December 31, 2020, the upper limit of the annual taxable income of a small low-profit enterprise is set to CNY 1 million (from the previous CNY 500,000). This means that if the annual taxable income of a small low-profit enterprise is lower or equal to CNY 1 million, its income will be counted in the taxable income at the half-reduced rate and the company income tax is calculated and paid at the rate of 20%.
A small low-profit enterprise is an enterprise engaged in an industry not restricted or prohibited by the State and meeting the following conditions:
In the case of industrial enterprise, it will be regarded as small low-profit enterprise if its annual taxable income does not exceed CNY 1 million, the number of persons employed is lower than 100 and the total assets is not more than CNY 30 million;
In the case of other kind of enterprise, it will be regarded as a small low-profit enterprise if its annual taxable income does not exceed CNY 1 million, the number of persons employed is lower than 80 and the total assets is not more than CNY 10 million.
The number of persons employed by the enterprise, as mentioned above, refers to the staff members with a labor relationships with the enterprise and the dispatched workers.
The number of the employees and the total assets should be calculated based on the quarterly average number of a single year, as below:
Quarterly average number =
(number at the beginning of a quarter + number at the end of the quarter) / 2
Quarterly average number of a single year =
(sum of the quarterly average numbers in a single year) / 4
If the enterprise starts or quits its activities during the year, the above indicators shall be calculated according to the actual business period during the tax year.
The measure provides a relief to smaller companies, reducing the tax burden and boosting their development.