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Chinese companies will benefit new tax cuts in 2019

In order to face a more complicated and challenging economic and financial environment, with the Chinese economy under slight downward pressure, Premier Li Keqiang has introduced, during the annual legislative sessions held by the National People’s Congress in March 2019, several measures so that the country could meet the economic target of 6.5 percent GDP growth and the social development goals.

According to the work report provided by the government, China will reduce the tax burden for enterprises and the social insurance contributions. The tax cuts will be mainly enjoyed by manufacturing companies and small businesses and include:

  • a further decrease of the value added tax rates following the cut already introduced in 2018. The rates will be reduced from the current 16% and 10% to respectively 13% and 9% and will mainly involve enterprises operating in the manufacturing, transportation and construction industries;

  • a decrease of the social contributions borne by the employers, in particular the pension insurance rate for urban employees may be cut down to 16% (currently the rates in TIER 1 cities as Shanghai and Beijing are respectively 20% and 19%).

The measures, to be implemented, will reduce the tax burden in 2019 by an expected amount of 2 trillion RMB, higher than the 1.3 trillion RMB of tax cuts achieved in 2018.

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