At the State Council executive meeting presided over by Premier Li Keqiang on March 20, decisions were made to specify the support measures for value-added tax (VAT) reduction, extend some tax-preferential policies, and give tax incentives to third-party enterprises engaged in poverty alleviation donations and pollution prevention and control.

“The large-scale tax cut initiative is to give market players a real sense of gain,” the Premier said, adding that support measures for VAT tax reduction will be improved with lowered VAT rates, to ensure full implementation of tax reduction policies.

The Government Work Report this year set out the plan for larger-scale tax cuts, including lowering the VAT rate in manufacturing and other industries from 16 to 13 percent, and the VAT rate in transportation, construction and other industries from 10 to 9 percent.

It was decided at the meeting that staring on April 1, the range eligible for VAT deduction will be expanded and will cover passenger transportation services. Taxpayers whose main businesses are postal services, telecommunications, modern services and consumer services will enjoy a 10 percent additional input VAT deduction before the end of 2021.

Increase in overpaid VAT following this round of tax cuts will be refunded through due procedures.

At the meeting, it also was decided the export tax rebate rates of certain goods and services and the tax deduction rate of purchases of farm produce will be adjusted.

Local transfer payments will be increased, with a focus on the central and western regions.

Premier Li Keqiang urged that in the process of deepening VAT reform, it is necessary to keep a close eye on the latest progress and to ensure that all industries will see their taxes go down, not up.

“The share that goes to enterprises in the national income distribution needs to be increased. This will help promote employment, expand tax sources and make public finance sustainable,” Premier Li said.

He also said that there are hundreds of millions of private enterprises and individual businesses in China, accounting for about 90 percent of total market entities. They are important forces for economic development, and the main force for job creation.

“Multiple measures must be taken to ease the tax burden of market entities, especially private enterprises and small and micro businesses, and give full play to their important role in stabilizing employment and stimulating market vitality to withstand a downward economy,” he added.

A decision also was made to extend tax preferential policies for public rental housing, the construction and operation of safe drinking water projects in rural areas, and domestic anti-HIV drugs, which expired in 2018.

From Jan 1 to the end of 2022, enterprises’ donations for poverty alleviation can be deducted in calculating taxable income; goods donated for poverty alleviation can be exempt from value-added tax.

From Jan 1 to the end of 2021, third-party enterprises engaged in pollution prevention and control will be subject to a corporate income tax rate of 15 percent.