China is unveiling new tax cut measures to spur economic dynamism and competitiveness.
Some tailored measures were approved at the State Council executive meeting presided over by Premier Li Keqiang on April 19. Some tests of taxation incentives will apply to wider areas, while the country’s value added tax will be consolidated.
“These are our first tax incentives issued after the NPC and CPPCC sessions, and they must be implemented to the full,” Premier Li emphasized.
After the new measures go into effect, the total tax reduction will amount to more than 380 billion yuan this year. The government work report set forth a goal of around 350 billion yuan ($50.8 billion). Authorities will further streamline the tax structure as well as create a simpler and more transparent taxation system.
This was further emphasized during Premier Li’s news conference, as he promised to reduce taxes and extra charges through cutting the costs of internet, electricity, and logistics, amounting to about one trillion yuan.
The executive meeting produced a slew of tax cut incentives.
First, the country’s nationwide VAT reform will proceed with a simpler structure. Starting this July, four VAT brackets will be streamlined into three, with tax rates of 17 percent, 11 percent and 6 percent targeting different products.
Second, tax cut incentives for small enterprises with limited profits will expand from January 2017 to December 2019. Businesses with profits under 500,000 yuan will be eligible, instead of the previous 300,000.
Third, the proportion of pre-tax deductions for innovation-based tech firms will be further expanded from the present 50 present of R&D prime cost to 75 percent, valid from 2017 to 2019.
Fourth, tax incentives currently given to venture capital firms will expand their coverage to incubator and new high-tech companies, securing venture capital support in eight designed locations as well as Suzhou Industrial Park, effective from Jan 1, 2017.
Fifth, further tax cuts for commercial health insurance will be applied nationwide, with an upper limit of 2,400 yuan in tax deductions per person.
It was also decided during the meeting that a three-year extension would be applied to a package of current tax cut policies that were due to expire by 2016.
China’s efforts in easing financial burdens for businesses are paying off, as figures from the country’s National Bureau of Statistics on April 17 showed that China’s GDP grew at 6.9 percent in the first quarter, with investment picking up and retail rebounding.
“We must drop unnecessary non-tax charges along with the tax cut efforts in order to lessen the burdens on enterprises for a greater competitive edge,” Premier Li stressed. “And the government is responsible for creating a sound environment to achieve this goal.”