Tax Incentives Policy

Certain tax incentives encouraging micro-enterprise for development

A) Encouraging the Creativity of Micro-Enterprises Policy

  • (1)  Selling home-grown products by agricultural producers are exempted from VAT
  • (2)  Sale of agricultural products - VAT at a rate of 13% applies.   Agricultural products includes growing, aquaculture, forestry, animal husbandry, aquaculture that produces a variety of plants, animal primary products, all these are within the specific scope of taxation.   "The Ministry of Finance, State Administration of Taxation Board” issued  "Agricultural Product Tax Base Notes" Notice (Cai Shui Zi [1995] No. 52) and its relevant provisions of the existing one are under execution.
  • (3)  Micro-enterprises which engage in wholesale, retail vegetables are exempted from VAT.
  • (4)  Micro-enterprises that produce and sale of feed, fertilizer products are at a rate of 13% VAT.    Micro-enterprise produce and sale of feed products are free from VAT.   Duty-free diet includes: single bulk feed, mixed feed, feed, concentrate feed and premix material.
  • (5)  Micro-enterprise produce and sale of nitrogen, phosphate and fertilizer that are the main raw materials and duty-free fertilizer is exempted from VAT.
  • (6)  Micro-enterprise produce, wholesale and retail of plastic sheeting are exempted from VAT.
  • (7)  Wholesale and retail micro-enterprises seeds, seedlings, fertilizers, pesticides, farm machinery are exempted from VAT.
  • (8)  Production and sale of micro-enterprise and the wholesale, retail and drip irrigation drip tape products are exempted from VAT; production and sales, and wholesale and retail organic fertilizer are exempted from VAT.
  • (9)  Qualifying small profit enterprises enjoy a reduced rate of 20% enterprise income tax; from 1 January 2012 to 31 December 2015, based on the annual taxable income below RMB 60,000 (including RMB 60,000).   For a small low-profit enterprise, its income are reduced at a rate of 50% on its taxable income, according to 20% of the corporate income tax rate.
  • (10) Micro-enterprises that engage in the following items and derive for income are exempted from corporate income tax:

                        (1)  Vegetables, cereals , potatoes, oilseeds , pulses , cotton, hemp, sugar, fruits, nuts cultivation ;

                        (2)  Breeding of new varieties of crops ;

                        (3) The cultivation of Chinese herbal medicines ;

                        (4)  Tree cultivating and planting ;

                        (5)  Livestock and poultry ;

                        (6)  Gathering of forest products ;

                       (7)   Irrigation, primary processing of agricultural, veterinary, agricultural extension, agricultural machinery operation and maintenance of agriculture forestry, animal husbandry and fishery service items head ;

                        (8)  Deep-sea fishing.

                       Micro-enterprises that engage in the following items and derive incomes are subject to corporate income tax : -

                                       (a). Flowers, tea and other beverage crops and spice crops ;

                                       (b). Marine aquaculture and inland aquaculture.        

  • (11) Qualified micro-enterprises, if confirmed by relevant tax authorities, can enjoy the western development tax administration policies, which is about a deduction of 15% corporate income tax rate.

B)  Promotion Micro-enterprise Financing Policy

  1. Venture capital investment companies take equity investment in unlisted, small and medium high-tech enterprises for more than 2 years, based on its 70% of the amount invested in the equity holders' hand and for at least two years from the year against which the venture capital business are for taxable income, to offset and against current year and it can be deducted in future tax years over.
  2. By the end of 2013, according to financial enterprises and agriculture-related loans to its SME loan risk classification, the provisions for proportion specific allowances for loan losses are allowed in computing taxable income amount.    From 1 January 2009 to 31 December 2013 : interest income for small loans to farmers from financial institutions are exempted from sales tax, taking into account the considerable tax income, the amount included in income by 90% ; rural credit cooperatives, rural banks, rural credit union funds by initiated the establishment of a wholly-owned banking institutions, lending firms and corporations located in the county (including county-level cities, districts , flag) and below county regional rural cooperative banks and rural commercial banks, finance and insurance income that reduced at a rate of 3% of business tax; if the company is farming, aquaculture, it provides access lines for insurance business premium income when calculating the taxable income, the proportion are at a rate of less 90% interest income.
  3. From1 January 2011 to 31 December 2015: Eligible SME credit guarantee institutions may not exceed 1% of the balance at the end of the year in accordance with the law under the guarantee liability provision which guarantee compensation reserve ratio, allowing the enterprise to enjoy an income tax deduction; while in previous year, guarantees for compensation accrued in the balance of current income into qualified SME credit guarantee institutions with no more than one year, will have a guarantee fee income ratio of 50%; unearned provision allows that the enterprise income tax deduction, while in previous year, the degree provides unearned balances into current income; SME credit guarantee institutions compensate for losses actually incurred.  To comply with tax laws and regulations on asset loss, tax deduction policy provides that it should be deducted from the tax deduction for compensation that guarantees quasi-equipment.   It is not enough to offset part of the corporate income tax for deduction according thereto.
  4. From 1 January 2011 to 31 December 2013, financial firms under "Loan Risk Classification Guidelines " ( Seniors [2001] No. 416 ), for its agriculture and SME loan risk classification, in accordance with the following provisions, credit loss of specific allowances shall be granted based on the calculation of taxable income amount:   1. Mentioned loans - provision at a rate of 2% ;   2. Substandard loans - provision at a rate of 25% ;   3. Doubtful loans - provision at a ratio of 50% ;   4. Loss loans: provision at a rate of 100%.
  5. From 1 January 2011 to 31 December 2012, regarding the animation business for  development of animation products, it provides animation scripts that compiled  image for design, background design, animation design, storyboard, animation, film, tracing lines, color, image synthesis, dubbing, soundtrack, sound synthesis, editing, subtitling, compression codes (network-oriented animation, mobile phone animation format adaptation) services, as well as cartoon animation business in the territory of transfer the copyright trading income (including animation brand, image, or content licensing and re- grant right), the reduced rate is 3% of business tax.
  6. From 1 November 2011 to 31 October 2014, for financial institutions and small and micro enterprises, those signed loan contract is exempted from stamp duty.
  7. For qualified energy service companies, implementation the contract about energy management projects, and achieving sales tax are exempted from income tax.

C) Supportive Measures on Micro-Enterprise Technical Innovation and Progression

  1. Qualified micro-enterprises: income from transfer of technology during the tax year, if the technology transfer's income of resident enterprise does not exceed RMB 500 Million, it is exempted from corporate income tax; and for the portion of those with more than RMB 5 million, half part of corporate income tax.
  2. For those recognized high-tech micro-enterprises, since the year of recognized onwards, it can apply to enjoy a reduced tax rate of 15% on levy for those corporate income tax receipts.
  3. Micro-enterprises meet the requirements of research and development – its costs calculation : if an enterprise is for the development of new technologies, new products, new processes that made health research and its development expenses, intangible assets are not formed through profit or loss, in accordance with the provisions, it can be deducted on the basis, according to research and development expenses: 50%; additional deduction; formation of intangible assets, in accordance therewith, 150% on the cost of amortization of intangible assets.
  4. Micro-enterprises that meet the requirements of fixed assets depreciation can be taken into shorten or taken for accelerated depreciation method. Qualifying fixed assets include:

             (1)     Due to technological advances, product replacement of fixed assets;
             (2)     Year round in strong vibration, high corrosion fixed assets approach should be taken to shorten the depreciation period, the minimum depreciation period shall not be less than the requirement of "Enterprise Income Tax Law Ordinance," Article 60, the depreciation period of 60%; if it take accelerated depreciation method, it can take the double declining balance method or the sum method.

D) Guides on Micro-enterprise Energy Conservation and Tidy-up Production Policy

  1. Micro-enterprises production, which is in line with "Ministry of Finance State Administration of Taxation on Comprehensive Utilization of Resources and Other Products VAT policy notice"  ( Cai Shui [2008] No. 156 ), "Ministry of Finance State Administration of Taxation on VAT Resource Utilization Policies and other Products Supplementary Notice" ( Cai Shui [2009] No. 163 ), "Ministry of Finance State Administration of Taxation on Adjusting the Sound Integrated Resource Products and Services using the VAT Policy Notice" ( Cai Shui [2011] No. 115 ), it can provide a product that can be exempted from value-added Jizhengjitui tax or VAT policy.
  2. The county level and the following small-scale hydropower unit produce electricity that can be calculated according to the rate of levy of 6% VAT. Generally taxpayers satisfied with the sale of the following goods, he can choose a simplified method in accordance with the rate of levy calculated in accordance with 6% VAT. Non-deductible VAT: the county level and the following small-scale hydropower unit production of electricity. Small hydro units means all types of investment funding body building less than installed capacity of 50,000 kilowatts ( including 50,000 kilowatts ) of small hydro units.
  3. Micro-enterprise production and sales method use the rotary kiln cement production ( including cement clinker ), or use the cement clinker grinding process outsourcing cement production, cement production waste raw materials which mixed in the proportion of not less than 30%, it can enjoy for a VAT Jizhengjitui policy.
  4. Purchases and the actual use of micro-enterprises include  the " Environmental Protection Equipment Preferential CIT catalog ( 2008 edition)";  "Energy Saving Equipment Preferential CIT catalog ( 2008 edition)", "Safe Production of Special Equipment CIT Tax Concessions Catalog (2008 edition)", all these are within the scope of environmental protection, energy saving, safe production of special equipment and special equipment, it can enjoy 10% of the amount invested enterprisefor  income tax payable tax credit for that year; corporate tax payable when insufficient credit , may apply  future years or degree of carry-over, but the carry-over period cannot be more than five tax years.
  5. Micro-enterprises with "Comprehensive Utilization of Resources Preferential CIT Catalog (2008 edition)" provides that, if resources are  the main raw material, production of national non-limiting and non-disabled which in line with national standards and industry -related products to obtain revenue, it can enjoy a reduction rate of up to 90% through year corporate income.
  6. Enterprises engaged in qualifying environmental protection, energy and water conservation project proceeds, the first production from the project operation income tax year, form the first year up to the third year are exempted from corporate income tax, and from the fourth to the sixth year, they are subject to corporate income tax.

 E)  Encouragement on Micro-enterprises placed Special Populations Employment Policy

  1. From 1 July 2007 onwards, the placement of disabled units that meet certain conditions, with the implementation of the tax authorities, in accordance with the actual unit placement of disabled persons, the limit Jizhengjitui VAT approach, actual placement of each person with a refundable value which added annually.  The specific limit tax is RMB 35,000 per person per year.
  2. For business enterprises, service enterprises (in addition to the advertising industry, real estate agents, pawn, sauna, massage, oxygen bar outside), employment services business enterprises and processing enterprises in neighborhoods and communities with the processing properties of small business entities, it increase in new jobs in the year or newly recruit to the "Employment and Unemployment Registration Certificate" personnel, with signing for more than 1 year term labor contracts and pay social insurance premiums according to the law. According to the actual number of strokes to be fixed by order of deductible business tax, urban maintenance and construction tax and corporate income tax shipping, a fixed standard of RMB 4,800 per person per year.
  3. Qualifying placement of micro-enterprises in wages paid to disabled persons according to the provisions is 100% additional deduction.


F)  Free of Charge - Small and Micro Enterprises Tax Policy

  • (1)   Province levels tax authorities to taxpayers Linggou tax registration certificate, invoice purchase books, tax returns and other table card single book will be free.
  • (2)   In accordance with the State Administration of Taxation and the Provincial People's Government regulations, from 1 January 2012 to 31 December 2014 , the province at all levels of tax authority on micro-enterprises purchase invoices are feely waived.
  • (3)  Waiver issued from the tax authorities can substain invoicing fee.