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VAT 16% to 13% announced during National People’s Congress

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Category: Business in Asia
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From 2019 March 3rd to March 20th, China’s annual two sessions – Chinese National Peoples’ Congress and Chinese People’s Political Consultative Conference – are being held in Beijing. A lot of important points are shown during the conference,  keep on reading to learn more!
Take a look at some of our previous posts: China‘s annual GDP report 2018

Main Targets

According to the government work report on March 5, 2019,  the government set specific targets for various economic indexes for 2019, in order to promote a well-off society.                                                                                                                                                  

Tax reductions

The government will implement a larger-scale of tax reduction – both inclusive tax cuts and structural tax cuts – the focus is to lower the tax burden of manufacturing and small and micro enterprises.

To reform VAT system, for industries such as manufacturing, the current 16% tax rate will be reduced to 13%; for transportation, construction, and other industries whose current tax rate is 10%, the tax rate will be reduced to 9%, ensuring a significant tax burden relief; Tax rate of the 6% first grade remains unchanged. However, by adopting supporting measures such as increasing tax credits for service industries, it is ensured that the tax burden of all industries will only be reduced, not added. Furthermore, the government will continue to simplify tax administrations and combine the three grades into two grades.
The government will fully implement the small and micro enterprises inclusive tax reduction policy released at the beginning of 2019. It is an important step to relieve the enterprises’ tax burden, stimulate market vitality, improve tax system, and optimize the income distribution system.

Small and micro enterprises inclusive tax reduction policy 

(small and micro enterprises: employees number are lower than 300, total assets or annual income is less than 50,000,000 RMB)

1. Small-scale taxpayers whose monthly sales are less than 100,000 RMB are exempt from VAT.

2. For small-profit enterprise whose annual taxable income is lower than 1 million RMB, the amount of taxable income shall be reduced by 25%, and the enterprise income tax shall be paid at the rate of 20%; For the portion of the annual taxable income from 1 million RMB to 3 million RMB, 50% of the taxable income shall be included in the taxable income, and the enterprise income tax shall be paid at the rate of 20%.

3. According to the actual conditions of the region and the needs of macroeconomic regulation and control, resource tax, urban maintenance and construction tax, property tax, and urban land tax, stamp duty (excluding stamp duty on securities transactions), farmland occupation tax and education surcharge, local education add-on can be reduced within 50% of the tax scale for small-scale taxpayers.

The government will significantly reduce the burden of corporate social security contributions. The portion of basic pension insurance for urban employees paid by the company will be reduced to 16%. Local governments may not increase the actual payment burden of small and micro enterprises during the process of expropriation system reform, and may not collect historical arrears. This year, the government is determined to make a substantial decline in the social security contributions of enterprises, especially small and micro enterprises. Instead, the government will accelerate the provincial-level overall reform of endowment insurance, continue to improve the central adjustment ratio of basic endowment insurance funds for enterprise employees, and transfer some state-owned capital to enrich social security funds.

Planned Welfare

  • The national highway charges will be basically canceled within two years.
Within two years, the national highway toll gates will be basically abolished, and non-stop-fast-charging will be implemented to alleviate congestion and improve convenience.
  •  The mobile network traffic fee will be reduced by more than 20%.
The average broadband fee for small and medium-sized enterprises will be reduced by 15%, and the average fee for mobile network traffic will be reduced by more than 20%.
  • Commercial electricity fee will be reduced by 10%.
The government will accelerate electricity marketization, remove the additional charges for electricity prices, and reduce the electricity fee in manufacturing. The average electricity price of industrial and commercial enterprises will be reduced by 10%.

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