China Extends Tax Breaks for Entrepreneurial Startups

May 4, 2014 Posted by China Briefing Reading Time: 2 minutes

BEIJING – The Chinese Ministry of Finance and the State Administration of Taxation have announced the extension of tax breaks aimed at boosting employment in the country, which were set to expire at the end of 2013. Under the tax relief program, tax breaks will be given to business startups and companies that are actively creating jobs in China’s market. The tax relief extension will last through December 31, 2016 and will expand the previous program’s scope to include all sectors of the economy.

The program will provide annual tax deductions of up to RMB9,600 (US$1,500) to businesses established by previously unemployed workers and recent college graduates, an increase in the maximum deductible allowance from RMB 8,000 previously.

Additionally, companies that employ formerly jobless workers for over one year will be eligible for a tax deduction of up to RMB5,200 (US$830) for each newly hired employee.

The domestic SME market has become a key pillar of China’s economic growth, comprising 99 percent of all Chinese businesses, accounting for 60 percent of the national GDP and employing some 80 percent of the national workforce. Yet many have been hit hard by a reduction in bank lending that still largely favors SOEs, and by increasing domestic labor and production costs.

The tax relief extension is hoped to provide a boost to China’s economy, which has seen a slowing growth rate of 7.4 percent during the first three months of 2014.

Currently, China creates 10 million new jobs each year, with urban centers seeing their total unemployed population decrease by 3.44 million in the first quarter of 2014, a sign that the country’s registered unemployment rate of 4.08 percent will continue to improve.

Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email china@dezshira.com or visit www.dezshira.com.

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