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Preferential Policies for Income Tax in 2023
In order to support the development of small and micro enterprises and individual businesses, according to a notice from the MOF and STA released on March 26, 2023, the policy will be implemented as follows:
The policy of reducing the income tax of small low-profit enterprises (SLEPs) and sole proprietors with an annual taxable income of less than RMB 1 million (approx. US$145,469) has been extended and adjusted until the end of 2024. These incentives initially expired at the end of 2022.
SLPEs whose annual taxable income does not exceed RMB 1 million, are eligible to be taxed on just 25 percent of their taxable income and for a reduced corporate income tax (CIT) rate of 20 percent; and Sole proprietorships with an annual taxable income of below RMB 1 million will have their individual income tax (IIT) reduced by half.
SLPEs refer to companies that operate in non-restricted areas and industries with an annual taxable income of less than RMB 3 million (US$436,408), less than 300 employees, and total assets of less than RMB 50 million (approx. US$7.3 million).
Previously, SLPEs were subject to a 20 percent CIT rate on 12.5 percent of the taxable income amount for the portion of taxable income not exceeding RMB 1 million, during the period from January 1, 2021 to December 31, 2022.
That is to say, after the extension and adjustment, the effective CIT rate for SLPEs’ annual taxable income below RMB 1 million increases from 2.5 percent to 5 percent, which is in line with that for the portion of SLPEs’ annual taxable income that is more than RMB 1 million but less than RMB 3 million.
Resource from STA
Mar.26.2023