Implementation Rules of Preferential Tax Deduction Policy for Small Low-Profit Enterprises and Small Scale Tax Payers

On January 17, 2019, the Ministry of Finance and the State Administration of Taxation (“SAT”) released the “Notice on implementing the preferential tax deduction policy for small low-profit enterprises” (Caishui [2019] No.13). The implementation period of this notice is from January 1, 2019 to December 31, 2021.

We have summarized several key points of this implementation for small low-profit enterprises as follows:

1. Small-scale Tax Payers:



Small-scale Tax Payers

Value-added Tax

< RMB 100,000


The sales amount for sale of goods, labor services, services and intangible assets does not exceed RMB100, 000 shall be exempted from VAT.

2. Small low-profit enterprise:



Small low-profit enterprises

Corporate Income Tax

The portion of annual taxable Income < RMB 1 million

The portion of annual taxable Income*25%*20%

The potion of annual taxable income > RMB 1 million, but < RMB 3 million

The portion of annual taxable Income*50%*20%

Notes: regardless if a small low-profit enterprise pays enterprise income tax by way of levying based on accounts examination or levying based on assessment, the enterprise may enjoy the aforesaid incentives.

The small low-profit enterprises shall satisfy three criteria:

  • Annual taxable income amount does not exceed RMB 3 million
  • Staff headcount does not exceed 300
  • Total assets do not exceed RMB 50 million

The stated number of employees and total assets should be determined based on the quarterly average number of the enterprise for the whole year.