Supporting Small Businesses in China's Post-Covid-19 Recovery

China's finance ministry has announced new measures to assist the struggling small businesses within the nation. As the post-Covid-19 economic recovery begins to lose momentum, these measures aim to provide much-needed support to this crucial sector.

Tax Measures Extended

The current tax measures, originally implemented in January, have been extended by an additional four years until the end of 2027. Previously set to expire at the end of this year, these measures have proven beneficial for small businesses. The extension allows small businesses with monthly sales below 100,000 yuan ($13,923) to be exempt from value-added taxes. Furthermore, those businesses that were subjected to a 3% value-added tax have now seen their rate reduced to 1%.

Relief for Financial Institutions and Small Firms

The finance ministry has also implemented measures to provide relief for financial institutions and small firms. Interest income earned by financial institutions from loans issued to small and micro companies will now be exempt from value-added taxes. In addition, loan contracts with small firms will be exempt from stamp duties.

Reduced Personal Income Taxes

Individuals running their own small businesses with an annual taxable income of under CNY2 million will benefit from a halved personal income tax rate. This measure aims to alleviate the tax burden on small business owners and stimulate growth within the sector.

Comprehensive Tax Exemptions

Small and micro firms will enjoy a wide range of tax exemptions. Resource taxes, property taxes, stamp taxes, and various administrative fees will all be waived. Additionally, micro firms that were previously required to pay a 25% tax rate will now face a reduced rate of 20%. These tax exemptions will remain in effect until the end of 2027.

These measures come as part of Beijing's extensive efforts to support small private businesses, recognized as crucial for generating employment opportunities for the younger workforce and bolstering confidence in the country's economy. China has faced challenges such as high youth unemployment, declining exports, a protracted property slump, and subdued domestic consumption. The implementation of these measures aims to address these issues and foster a favorable environment for small businesses to thrive.