23 April, 2017
China's state council has announced cuts to business taxes worth 380 billion yuan (£43 billion) to encourage competition.
Reforms to the country's value-added tax (VAT) will be completed, creating a flatter structure with three tax brackets instead of four, Chinese premier Ki Keqiang said (link in Chinese).
Tax rates of 17%, 11% and 6% will continue to apply and those products previously on the 13% rate, including agricultural products and natural gas, will drop to the 11% band, he said.
Small businesses will now pay reduced tax on profits of less than 500,000 yuan. The previous profit limit was 300,000 yuan.
Technology firms will be able to deduct 75% of their R&D costs from their tax liability, up from 50%, and venture capital firms will be given tax incentives to expand their investment in technology firms in eight regions including Beijing, Tianjin, Shanghai and Suzhou industrial park, China Daily reported.
Further cuts will also apply to commercial health insurance, with up to 2,400 yuan to be deducted from tax liability per person, it said.
"We must cut non-tax charges along with the tax cut efforts in order to reduce the burden on enterprises and raise their competitiveness. The government is responsible for creating a sound environment to achieve the goals," Li said.
For further information, please contact:
Ian Laing, Partner, Pinsent Masons
ian.laing@pinsentmasons.com
