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China’s Tax Cuts for SME

The Ministry of Finance and the State Administration of Taxation jointly issued on 1 March 2022 the Announcement [2022] no. 10 about “the Further Implementation of the Six Taxes and Two Fees Reduction and Exemption Policy for Small and Micro Enterprises”.

The Announcement provides further support for the development of smaller enterprises, such as small-scale VAT taxpayers, small low-profit enterprises, and self-employed households.

Eligible taxpayers can therefore reduce the following six taxes and two fees:

  • Resource tax

  • Urban maintenance and construction tax

  • Real estate tax

  • Urban land use tax

  • Stamp duty tax (excluding the stamp duty for security transactions),

  • Farmland occupation tax

  • Education surcharge

  • Local education surcharge

Each province will implement the policy from 1 January 2022 to 31 December 2024 according to the local conditions, and eligible taxpayers can claim reductions or exemptions without additional documents.

The State Administration of Taxation issued the Circular [2022] no. 3 on 4 March 2022, to clarify that small low-profit enterprises that are eligible for the reduction and exemption policy of the above six taxes and two fees are those with a taxable income, total assets and total headcount not exceeding respectively CNY 3 million, CNY 50 million, and 300 persons.

An enterprise registered as a general VAT taxpayer is determined to be a small low-profit enterprise based on the latest annual CIT settlement.

Newly established enterprises registered as general VAT taxpayers meeting the two conditions of no more than 300 employees and total assets of no more than CNY 50 million are eligible to benefit from the policy until their first annual CIT settlement. If, after the first annual CIT settlement, the enterprise is classified as a small low-profit enterprise, it could continue to enjoy the policy; if the enterprise is determined not to be a small low-profit enterprise after the first CIT settlement, it will be no longer eligible for enjoying the policy.


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