Preferential income tax policy for small and low-profit enterprises

On 8 April 2014, the Ministry of Finance (“MOF”) and the State Administration of Taxation (“SAT”) issued “Announcement on Preferential Income Tax Policies for Small and Low-Profit Enterprises” ( Caishui 2014 No. 34), which is in effective from 1 January 2014 to 31 December 2016. Based on the announcement, small and low-profit enterprises whose annual taxable income not exceeding RMB 100,000, shall be subject to income tax at the rate of 20% on only 50% of the taxable income.

Small and low-profit enterprises are enterprises that operate in an industry not restricted by the state and satisfy the following conditions:

Industrial enterprises

  • Taxable income ≧ RMB 300,000;
  • Number of total employees ≧ 100; and
  • Total assets ≧ RMB 30million

Other enterprises

  • Taxable income ≧ RMB 300,000;
  • Number of total employees ≧ 80; and
  • Total assets ≧ RMB 10million

On 18 April 2014, SAT further announced to extend the scope of the preferential income tax policies, the key points are:

  1. All qualifying small and low-profit enterprises can enjoy Caishui 2014 No. 34, including enterprises whose income taxes are collected on the assessment basis.
  2. Qualifying small and low-profit enterprises can use the preferential income tax policies on quarterly prepaid income tax and the annual income tax assessment. No approval is required. The number of the total employees and the total assets amount shall be filed together with the annual income tax assessment.
  3. If the small and low-profit enterprises do not enjoy the preferential policy on the quarterly prepaid income tax, it still can enjoy it wholly on the annual income tax assessment.