China will extend the duration of several temporary tax relief measures to offset the impact of the COVID-19 pandemic and further support small and micro enterprises, government officials said on Tuesday.
The Ministry of Finance and the State Taxation Administration said that the duration of some preferential tax policies, specified in 16 documents, will be extended till Dec. 31, 2023, specifically to support the development of small and micro enterprises and foster scientific and technological innovation.
Experts said the extended policies will increase the share of pretax deductions for research and development expenses, the value-added tax exemptions of interest income of small and micro businesses of financial institutions, and VAT exemption for some pension institutions.
The VAT relief to support the resumption of privately owned business will be extended to the end of this year. For small-scale VAT taxpayers in Hubei province, the tax rate will be reduced to 1 percent from 3 percent for taxable sales income and some prepaid VAT items.
Some relief for personal income tax and supportive measures for the movie industry will also be extended to the end of this year, the two government departments said.
By extending the duration of some tax relief measures to specifically benefit smaller businesses, the government is determined to maintain stability and continuity of macroeconomic policies, said Li Xuhong, director of the Institute of Finance and Taxation Policy and Application with the Beijing National Accounting Institute.
Because of the COVID-19 shocks, many small and micro enterprises are still weak, and some are in the process of work resumption. This year, China's proactive fiscal policy will maintain continuity, stability and sustainability, with additional supportive measures coming up, which are crucial for consolidating the economic fundamentals, said Li.
The nation issued the tax relief measures after the outbreak of the COVID-19 pandemic. Last year, the country reduced the burden on market entities by more than 2.6 trillion yuan ($399.4 billion) by cutting taxes and fees, including 1.7 trillion yuan in social insurance premium cuts and exemptions, according to the ministry.
China's economy has shown a stable recovery so far this year, but the pandemic has not ended and there are several uncertainties in the external environment. Some industries are still influenced by COVID-19 shocks.
The finance ministry and the nation's tax authorities will take further steps to implement already-launched tax and fee reduction policies to support key areas, according to officials from the Ministry of Finance.
According to the Government Work Report, which was passed at the annual session of the National People's Congress earlier this month, the VAT threshold for small-scale businesses was raised from 100,000 yuan to 150,000 yuan in monthly sales.
On the basis of preferential policies already in force, the government will halve the income tax of micro and small enterprises and self-employed individuals on annual taxable income below 1 million yuan, the report said.