China Will Provide 2.5 Trillion for Tax Rebate and Reduction

The fifth session of the 13th National Committee of CPPCC had it closing ceremony at the Great Hall on March 10th. But have you known about the new changes mentioned in the government work report?
This year, for small and medium-sized enterprises, the best news is the tax rebate policy. According to the report, the government will provide 2.5 trillion for tax rebate and reduction in 2022, including VAT exemption, preferential corporate income tax, rebate of overpaid VAT, and special additional deductions for individual income tax.

In general, the government will make more effort to further carry out the policies of cutting taxes and fees in 2022, including phasing out VAT for small-scale taxpayers, halving corporate income tax for eligible small-and-micro enterprises, and granting rebates for tax credits on a large scale. Benefits are coming!
No VAT payments for small taxpayers
We will extend tax and fee reduction policies that support manufacturing, micro and small enterprises and self-employed individuals, and expand the scale and scope of those policies. A temporary exemption on VAT payments will be granted to small taxpayers.Compared with the current tax preference for small taxpayers:◆ The VAT levy rate for small taxpayers is reduced from 3% to 1%.◆ Monthly sales of 150,000 yuan or quarterly sales of 450,000 yuan below can enjoy the exemption of VAT.

The preference of 3% to 1% for small taxpayers will be maintained, while the VAT exemption is expected to be increased to 200,000 yuan on monthly sales or 600,000 yuan on quarterly sales.

More reduction on corporate income tax for micro-and-small enterprises
Corporate income tax on annual taxable income of between one million to three million yuan will be halved once again for micro-and-small enterprises.According to the previous policy, for micro-and-small enterprises, the corporate income tax on annual taxable income of less than 1 million yuan was 2.5 %, and that of between one million to three million yuan was 10%. Which is to say, with the new policy coming out, the later will be reduced from 10 % to 5 %.

For example: if the taxable income of a micro-and-small enterprise is 3 million yuan, then its corporate income tax payable in 2022 is 125,000 yuan (100*2.5%+200*5%), and the actual tax rate is already as low as 4.17%! 
VAT credit refunds on a big scale
To improve the cash flow of enterprises, promote consumption-driven investment, and further improve the system for refunding VAT credits, we will issue VAT credit refunds on a big scale this year. We will give priority to micro and small enterprises,refunding outstanding VAT credits to them in one lump sum by the end of June, while also fully refunding newly added credits.With a focus on supporting manufacturing, the government will work to fully resolve problems in refunding VAT credits in manufacturing, research and technical services, environmental protection, electricity and gas, and transportation industries. Such a substantial increase in VAT credit refunds will help strongly boost market confidence.Tax refunds and cuts are expected to total 2.5 trillion yuan this year. VAT credit refunds will account for 1.5 trillion yuan of this sum and all go straight to enterprises.

Additional tax deductions for R&D costs
We will enhance the policy on granting addition tax deductions for R&D costs, raising the deductions coverage for small and medium sci-tech enterprises from 75% to 100%.
Preference on individual income tax
We will improve the supporting measures for the three-child policy, make sure expenses for children under three part of the special additional deductions for individual income tax, and develop public-interest childcare services to ease the burden of raising a family.As soon as the new policy is introduced, we can enjoy education deduction of 1,000 yuan per month for each child not after his/ her three-year-old but from birth.

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