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Announcement of State Taxation Administration on Matters Relating to Implementation of Income Tax In2021-04-07 14:40:59

Announcement of State Taxation Administration on Matters Relating to Implementation of Income Tax Incentives for Supporting Development of Small Meagre-profit Enterprises and Individually-owned Businesses

Announcement 2021 No. 8 from State Taxation Administration

For the purpose of implementation of the Announcement of Ministry of Finance and State Taxation Administration on Implementation of Income Tax Incentives for Small Meagre-profit Enterprises and Individually-owned Businesses (2021 No. 12), and further supporting development of small meagre-profit enterprises and individually-owned businesses, announcement is hereby made on the relevant matters as follows:

I. Matters relating to 50% reduction of income tax for small meagre-profit enterprises

(I) For the portion of a small meagre-profit enterprise's annual taxable income which does not exceed RMB1 million, the enterprise is entitled to the reduction of corporate income tax at a tax rate of 20% on 12.5% of its taxable income.

(II) Detailed administration of tax collection involved in entitlement to the aforesaid policies by small meagre-profit enterprises shall be subject to the relevant provisions of the Announcement of State Taxation Administration on Issues Relating to Implementation of Inclusive Income Tax Relief Policies for Small Meagre-profit Enterprises (2019 No. 2).

II. Matters relating to individual income tax on individually-owned businesses

(I) For the portion of an individually-owned business's income from business operation which does not exceed RMB1 million, the business is entitled to 50% reduction of individual income tax on the basis of the existing preferential policies, regardless of the levying method for it.

(II) An individually-owned business may enjoy the incentives at the time of prepayment of tax, its annual taxable income amount shall be provisionally determined in accordance with the status up to the end of the current filing period, and the excess amount shall be refunded and any shortfall made up at the time of annual settlement. Where an individually-owned business derives income from business operation from two or more sources, it is required to recompute the tax reduction or exemption amount based on its annual consolidated taxable income from business operation at the time of filing of annual consolidated tax return, and any excess amount shall be refunded and any shortfall made up.

(III) An individually-owned business shall compute tax reduction or exemption amount in accordance with the following methods:

Tax reduction or exemption amount = (taxable income amount for income from business operation of the individually-owned business which does not exceed RMB1 million - tax reduction or exemption amount under other policies × taxable income from business operation of the individually-owned business which does not exceed RMB1 million ÷ taxable income from business operation) × (1 - 50%)

(IV) Individually-owned businesses shall fill the tax reduction or exemption amount computed using the aforesaid method in the "tax reduction or exemption amount" column in the tax return for income from business operation, with a "Report on Matters Relating to Individual Income Tax Reduction or Exemption" attached. For individually-owned businesses which file tax returns through the electronic tax bureau, the tax authorities will provide pre-completion services for tax reduction or exemption amount under such preferential policies and the Report Form. For individually-owned businesses which file fixed amount income on a regular basis, the tax authorities will collect the tax based on the tax reduction or exemption amount.

III. Matters relating to cancellation of pre-collection of individual income tax for issuance of cargo transport invoices on behalf

Individually-owned businesses, sole proprietorship enterprises, partnership enterprises and individuals will no longer be required to pre-pay individual income tax at the time of issuance of cargo transport VAT invoices on behalf. Individually-owned businesses, investors of sole proprietorship enterprises, individual partners of partnership enterprises and other individuals engaging in cargo transport business activities shall declare and pay individual income tax on income from business operation voluntarily pursuant to the law.

IV. Relating to date of implementation and other matters

Article I and Article II of this Announcement shall be implemented with effect from 1 January 2021 and cease to be effective on 31 December 2022. Where an individually-owned business has paid individual income tax on income from business operation during the period from 1 January 2021 to the date of promulgation of this Announcement, such payment may automatically offset the tax amount in subsequent months; where there is any balance after offsetting in the current year, tax refund may be made at the time of final settlement; or the individually-owned business may apply directly for refund of the tax amount which should be reduced or exempted. Article III of this Announcement shall be implemented with effect from 1 April 2021.

In case of any discrepancy between Article 1 of the Announcement of State Taxation Administration on Issues Relating to Implementation of Inclusive Income Tax Reduction and Exemption Policies for Small Meagre-profit Enterprises (2019 No. 2) and this Announcement, this Announcement shall prevail. The Announcement of State Taxation Administration on Issues Relating to Pre-collection Rate for Individual Income Tax on Issuance of Cargo Transport Invoices on Behalf ([2011] No. 44) shall be repealed simultaneously.

State Taxation Administration

7 April 2021