China Rolls out Seven Tax Cuts to Aid Innovation and Small Businesses
China will make further tax cuts worth over 60 billion yuan (about 9.5 billion U.S. dollars) to drive innovation and entrepreneurship and boost the development of small and micro businesses, a State Council executive meeting presided over by Premier Li Keqiang decided on 25th April. The move aims to reduce the cost for innovation and entrepreneurship, energize small and micro businesses and spur job creation.
- The annual taxable income threshold of small and micro businesses eligible for halved income tax will be raised from 500,000 to 1 million yuan.
- The per unit value of newly-purchased research and development (R&D) instruments and equipment eligible for one-time tax deduction will be raised from 1 million to 5 million yuan.
These two measures will be effective from Jan. 1, 2018 to Dec. 31, 2020, the meeting decided.
- The meeting also decided to abolish the preclusion of the expenses of commissioned overseas R&D from additional tax deduction.
- The time limit for the capital loss carryover of high-tech firms and technological small and medium-sized firms (SMEs) will be extended from 5 to 10 years pending approval.
- All enterprises will see the tax deduction for employee training costs raised from the current 2.5 percent to 8 percent, the same rate as high-tech companies enjoy. These three measures are effective from Jan. 1 this year.
- Measures of stamp duty relief for books of account starting from May 1, 2018.
- The tax incentive enjoyed by venture capital firms and angel investors that sees 70 percent of their investment deducted from the taxable income of the seed and early stage high-tech startups they finance will be extended nationwide. This policy has been piloted in the China's eight innovation and reform experimental zones, including the Beijing-Tianjin-Hebei area, Shanghai and Guangdong, as well as in Suzhou Industrial Park. Such tax cuts will be implemented from Jan. 1 for corporate income tax and from July 1 for personal income tax this year.
Li said that while this round of tax cuts is targeted at small and micro businesses to spur innovation, the whole economy stands to benefit. Though being the biggest job providers, small and micro businesses have long had difficulty in accessing affordable financing. Supporting their development is critical to ensuring employment.
Li stressed that while established firms receive due attention, greater support must be extended to all growth enterprises, including SMEs and micro businesses.
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