China extends certain preferential policies to 2023

To further support the innovation, technological research, and development of small and medium enterprises, the Ministry of Finance and the State Administration of Taxation jointly issued Announcement [2021] No. 6 on Extending the Implementation Period for Some Tax Preferential Policies.

Announcement 6 extends several preferential tax policies available to companies, many of which were initially expired in December 2020. In the specific, companies and eligible entities established in China will continue to enjoy the following policies:

• Newly acquired fixed assets (other than real estate properties such as land and buildings) with a unit value not exceeding CNY 5 million are allowed to be deducted in one lump sum in the year of acquisition. The policy is extended to December 31, 2023.

• Taxpayers carrying on R&D activities can enjoy the extra – deduction of 75% in addition to the deduction for the actual expenses incurred, providing that such R&D expenses are not capitalized into intangible assets. The policy is to December 31, 2023. An executive meeting of China’s State Council decided to further increase the extra – deduction for manufacturing enterprises from 75% to 100%, applicable from January 1, 2021.

• Interest paid to financial institutions on loans (not exceeding CNY 10 million) granted to small enterprises, micro–sized enterprises and privately – owned businesses are exempt from VAT. The policy is extended to December 31, 2023.

• Loan contracts between financial institutions and small and micro–sized enterprises will be exempted from stamp duty tax. The policy is extended until December 31, 2023.

Furthermore, Announcement 6 grants an extension to December 2023 for policies supporting specific industries such as animation, aircraft, elderly and medical care, targeting enterprises and entities operating therein, the IIT exemption for foreign investors obtaining income from China’s domestic crude oil futures, the extension of the policies for the deduction of the reserves of insurance companies, securities companies, futures companies, and financial institutions and a reduction by 30% of the resource tax on shale gas (which standard rate is 6%).