China Regulatory Brief: Preferential Tax Policies & SME Support

April 21, 2014 Posted by China Briefing Reading Time: 4 minutes

China Reduces CIT Rate for Encouraged Industries in Western Region

On April 16, the National Development and Reform Commission (NDRC) released the “Catalog for Encouraged Industries in Western Region of China” (Opinion Seeking Draft, hereinafter referred to as the ‘Catalog’)” with the aim of furthering development of the western region in China. Eligible enterprises in the encouraged industries listed in the Catalog will enjoy a reduced corporate income tax (CIT) rate of 15 percent. All opinions should be submitted before April 30, 2014. The complete version of the Catalog can be found here.

China Provides Preferential Tax Policies for Cultural Enterprises

On April 2, the State Council released the “Regulations on Further Supporting the Development of Cultural Enterprises and Regulations on Transformation of Operating Cultural Public Institutions into Cultural Enterprises in Cultural System Reformation (Guo Ban Fa [2014] No.15, hereinafter referred to as the ‘Regulations’)”. The Regulations aim at supporting the development of cultural enterprises.

According to the Regulations, preferential business tax (BT) will be replaced by preferential value-added tax (VAT). Eligible cultural enterprises engaged in supporting technologies for the cultural industry can enjoy a reduced corporate income tax (CIT) of 15 percent. Further, VAT exemption applies to rural digital cable television. The Regulations will be effective from January 1, 2014 to December 31, 2018.

China Provides Special Funds for SMEs

On April 11, the Ministry of Finance (MOF) and four related departments jointly released the “Interim Measures for Management of Special Funds for Small and Medium-sized Enterprises (SMEs) Development (Cai Qi [2014] No.38 hereinafter referred to as the ‘Measures’)”. According to the Measures, a maximum amount of RMB3 million will be given to technological SMEs to subsidize their R&D expenses on innovative projects. International cooperation and technological innovation are highly encouraged. The Measures took effect on April 11, 2014.

China Issues New Classifications and Codes for Foreign-related Receipt and Payment Transactions

On April 16, the State Administration of Foreign Exchange (SAFE) issued the “2014 Version of Classifications and Codes for Foreign-related Receipt and Payment Transactions (Hui Fa [2014] No.21, hereinafter referred to as the ‘2014 Code’)”. The classifications and codes are used when declaring foreign-related receipt and payment transactions. The 2014 Code was promulgated to strengthen monitoring of cross-border flow of capital; it is the basis for compiling international balance of payments statistics based on the “Balance of payments and international investment position manual” issued by the IMF. The 2014 Code takes effect on May 1, 2014.

China Simplifies Tax Return Procedures

On April 11, the State Administration of Taxation (SAT) released “Announcement on Canceling and Simplifying Tax-related Documents (SAT [2014] No.21, hereinafter referred to as the ‘Announcement’)”. Based on the Announcement, 15 tax-related documents will be cancelled, including the “Registration Form of Basic Information Concerning Foreigner,” “Breakdown of Tax-exempt Exported Goods and Services” and “Application Form for Activation of Mutual Negotiation Procedures.” The Announcement takes effect on May 1, 2014.

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