Mainland China Tax and Fee Reductions Policies of 2021

China will extend the duration of many tax relief measures this year including institutional tax reduction, broadening the band of small-scale VAT taxpayers, implementation of new structural tax reductions and policy adjustments.

The VAT threshold of monthly sales for small-scale taxpayers will be raised from CNY100,000 to CNY150,000. On the basis of existing preferential policies, income tax will be further halved for the part of annual taxable income less than CNY1 million yuan for small and micro enterprises and individual businesses.

This demonstrates that China will further support the development of small and micro enterprises and play a more active role in stimulating and promoting the economic vitality of the market.

Meanwhile, the policy of deducting 75% of an enterprise’s R&D expenses will continue and an increase of deductions to 100% for manufacturing enterprises.

In terms of reducing fees, the government will further eliminate unreasonable increases in electricity prices and continue to reduce electricity prices for general industrial and commercial businesses. Average rates for broadband and dedicated telecommunication lines for small and medium-sized enterprises will be cut by another 10%.

In addition, port construction fees will be abolished, and fees levied on airlines under the Civil Aviation Development Fund will be reduced by 20%. Government will encourage places that are more affected by COVID-19, to reduce or exempt rents for small and micro enterprises in the services sector, individual industrial and commercial households which rent state-owned houses.

In terms of financial policies, banks have been encouraged to increase loans in a targeted way and lower interest rates, extend repayment time of the principal and interest on loans to micro, small and medium-sized enterprises as well as increase loans to include small and micro enterprises of large commercial banks by more than 50%, and transfer CNY1.5 trillion yuan of profits from the financial system to the real economy.

Accordingly, we have lowered fees for small and micro enterprises, improved supervision of deposit interest rates, promoting lower real lending rates, and continue guiding the financial system to benefit the real economy. This year, we aim to make it easier for small and micro enterprises to get financing, and ensure that overall financing costs remain stable while falling.

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