Current CIT Policies for Small-scale and Low Profits Enterprises

For small-scale and low profits enterprises in China, a lot of tax relief policies have been released by
the Chinese tax authorities in recent years.

Overview

The following table summarizes the current corporate income tax (“CIT”) policies for small-scale and low profits enterprises:

Explanation and impact

We can see from the table that the tax incentive policy on the taxable income no higher than CNY 1 million has expired as of 31 December 2022. Currently, the State Taxation Administration has not an-nounced the renew policy yet. If this policy is not extended, the CIT shall be calculated at 20% for tax-able income no higher than CNY 1 million from January 2023.

However, the existing incentive tax policy for taxable income between CNY 1 million and CNY 3 million remains valid until the end of 2024. According to the ability-to-pay principle of taxation, generally the effective tax rate for taxable income of CNY 0-1 million shall not be higher than that for taxable inco-me of CNY 1-3 million. So we expect that the tax incentive policy will likely continue for taxable income no higher than CNY 1 million or change to the same policy for taxable income of CNY 1-3 million.

With the first quarter of 2023 coming to an end soon, it is time to file the provisional CIT return for Q1 in China. We advise small-scale and low profits enterprises in China to keep a close eye on policy changes in the near future. We will also update the policies once the new policies are announced.