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China's Tax 5% for Small Enterprises

The Ministry of Finance (MOF) and the State Taxation Administration (STA) have jointly released the Announcement on the Preferential Income Tax Policy for Small and Micro Enterprises and Individual Businesses (the "Announcement") and the STA has subsequently issued the Announcement on Tax Collection and Administration Issues Concerning the Implementation of the Preferential Income Tax Policy for Small and Low-Profit Enterprises and the Announcement on Relevant Matters Concerning the Implementation of Preferential Individual Income Tax Policy for Supporting the Development of Individual Businesses. The implementation period for the Announcement shall last from January 1, 2023, to December 31, 2024.

According to the Announcement, the portion of the annual taxable income of a small and low-profit enterprise not exceeding CNY1 million will be included in the taxable amount at 25%, based on which the enterprise income tax payable will be calculated at the tax rate of 20%.

For individual businesses, the portion of less than CNY1 million of the annual taxable income will be subject to half-reduced individual income tax, in additional to the existing preferential policies.


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