Guide:

Small and micro enterprises play a vital role in the market economy, and to support their sustainable development, the government has introduced a range of tax preferential policies. These policies aim to alleviate financial pressures on small businesses and promote their growth. As we approach 2024, it’s important for SMEs to be aware of the tax benefits available to them. Here are some key tax policies that will remain in effect in the coming year:

• Value-Added Tax (VAT) Exemption Policy for Small-Scale Taxpayers.
• Tax Preferential Policies for Small Loan Companies.
• Tax Preferential Policies for Financial Institutions Supporting Farmers, Small and Micro Enterprises, and Individual Businesses.
• Tax Policies for Technology Enterprise Incubators, University Science Parks, and Mass Innovation Spaces.

Below are the details:

• Value-Added Tax (VAT) Exemption Policy for Small-Scale Taxpayers
  • Policy Highlights: Small-scale taxpayers with monthly sales of less than 100,000 RMB (including this amount) are exempt from VAT. For small-scale taxpayers subject to a 3% tax rate on taxable sales income, VAT is levied at a reduced rate of 1%. For items subject to a 3% pre-tax rate, VAT is prepaid at a reduced rate of 1%.
  • Policy Documents:
  • “Announcement of the Ministry of Finance and the State Administration of Taxation on Clarifying Policies for VAT Exemption for Small-Scale Taxpayers” (No. 1 of 2023)
  • “Announcement of the Ministry of Finance and the State Administration of Taxation on VAT Exemption Policy for Small-Scale Taxpayers” (No. 19 of 2023)

• Tax Preferential Policies for Small Loan Companies
  • Policy Highlights: According to announcements issued by relevant departments, interest income from small loans to rural households obtained by small loan companies approved by provincial-level local financial supervision and management departments is exempt from VAT. When calculating the taxable income, interest income from small loans to rural households obtained by small loan companies approved by provincial-level local financial supervision and management departments is included in the total income at a rate of 90%. A deduction is allowed for the loan loss provision calculated at 1% of the year-end loan balance for small loan companies approved by provincial-level local financial supervision and management departments.
  • Policy Documents:
  • “Announcement on Continuing to Implement Tax Preferential Policies for Small Loan Companies” (Announcement No. 54 of the Ministry of Finance and the State Administration of Taxation in 2023)

• Tax Preferential Policies for Financial Institutions Supporting Farmers, Small and Micro Enterprises, and Individual Businesses
  • Policy Highlights: Until December 31, 2027, interest income obtained by financial institutions from granting small loans to small-scale and micro enterprises, individual businesses, and rural households is exempt from VAT. Until December 31, 2027, guarantee fees received by taxpayers for providing loan guarantees to rural households, small-scale enterprises, micro-enterprises, and individual businesses, as well as re-guarantee fees received for providing re-guarantees for original guarantees, are exempt from VAT.
  • Policy Documents:
  • “Announcement on Continuing to Implement Tax Preferential Policies for Financial Institutions’ Interest Income from Rural Loans” (Announcement No. 67 of the Ministry of Finance and the State Administration of Taxation in 2023)

• Tax Policies for Technology Enterprise Incubators, University Science Parks, and Mass Innovation Spaces
  • Policy Highlights: Real estate and land used by national-level and provincial-level technology enterprise incubators, university science parks, and nationally registered mass innovation spaces for self-use or provided to incubated entities through donation or rental are exempt from property tax and urban land use tax. Income obtained from providing incubation services to incubated entities is exempt from VAT.
  • Policy Documents:
  • “Announcement on Continuing to Implement Tax Policies for Technology Enterprise Incubators, University Science Parks, and Mass Innovation Spaces” (Announcement No. 42 of the Ministry of Finance, the State Administration of Taxation, the Ministry of Science and Technology, and the Ministry of Education in 2023)