On 24 March 2023, during an executive State Council meeting led by Premier Li Qiang, the State Council of China made an important announcement regarding the extension of supportive tax and fee policies. This includes the highly anticipated renewal of corporate income tax (CIT) incentives for small and low-profit enterprises (SLPE).
Subsequently, the Ministry of Finance and the State Taxation Administration issued corresponding announcements outlining the implementation details. The reduced CIT policy for SLPEs, applicable to the portion of income below CNY 1 million, has been extended until the end of 2024. Furthermore, SLPEs will be subject to a 20 percent CIT rate on 25 percent of the taxable income amount for the portion of taxable income that does not exceed CNY 1 million between 1 January 2023, and 31 December 2024. In other words, the effective CIT rate for SLPEs with annual taxable income below CNY 1 million will increase from 2.5 percent to 5 percent.
In order to qualify for the reduced tax rate, a business must meet the criteria of being a small, low-profit enterprise. This designation applies to companies that have an annual taxable income not exceeding CNY 3 million, no more than 300 employees, and no more than CNY 50 million of assets.
