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Insights e-Newsletter

China Covid-19 Outbreak Snippets • April 13th, 2020

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With the Chinese economy facing challenging times, there have been enormous efforts to help foreign businesses in China from falling further into difficulties by expanding beneficiaries of government funds and extending Tax Breaks to 2023. There are plenty of beneficial policies for businesses to take advantage, and LehmanBrown will continue to share them to assist business through these hard times.

C Tax Credit Rating Companies Supported in Seriously Impacted Areas

The State Administration of Tax and the China Banking and Insurance Regulatory Commission collaboratively announced to gradually expand the scope of beneficiaries of the “interaction between banks and tax agencies” to companies with tax credit rating of C for companies in Hubei province or other areas which were heavily impacted by the outbreak.

Recommendations

Tax Credit Rating is based on the scores from the annual valuation of a company. The score is also part of the corporate social credit system, categorized in order of highest to lowest, A, B, M, C and D, these ratings affect the access to tax preferential policies.

Lower rated companies will not only face exclusion from accessing preferential tax policies, they will also get limitations and prohibitions affecting their business. These limitations may include a stricter review of all documentation, increased checks when conducting bids, importing and exporting, expanding the business, and more.

This decision to include business with C Tax Credit Rating could help business with lower tax credit ratings to easily receive financial support to overcome this economically strenuous time.

 

Tax Breaks Extended Until End of 2023

Recently announced at a State Council executive meeting that tax breaks previously set to expire have been extended to the end of 2023. Explicitly financial institutions can enjoy VAT exemption on interest income from loans under 1 million RMB granted to small and micro enterprises, individually owned business and farmers. They are also allowed to only take 90% of interest income on loans under 100,000 RMB granted to farmers and insurance premium income on providing insurance service to agricultural breeders as taxable income.

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Small loan companies can enjoy VAT exemption on interest income on loans under 100,000 RMB granted to farmers and are allowed to only take 90% of the income as taxable income. In addition, they are allowed to deduct their loan loss provision (1% of loan ending balance) before tax.

 

Establishing New Comprehensive Pilot Zones for Cross-Border E-commerce

The state council decided to set up a new 46 comprehensive pilot zones in addition to the 59 already set up, and China will have 105 comprehensive pilot zones now, which has covered 30 provinces, autonomous regions, and the retail export goods in all pilot zones will be exempted from value-added tax and consumption tax. As well it is to encourage companies to build and share overseas warehouses jointly.

 

Recommendations
The Cross-Border E-commerce Pilot (CBE) offers a new business model to use to access the Chinese market. Such a model is a solution for new business wanting to enter the Chinese market and for business leaving China while still supplying their products in China.

What makes CBE more attractive in recent months are the policies for further expansion to more cities and regions, along with the inviting exemption such as VAT, consumption tax and the corporate income tax on products sold via the pilot, meaning greater returns for foreign businesses.

Find Out More

In case you missed the last week’s snippets you can find them by clicking the link here.

If you would like to find out how your business can benefit from these policies and potential others not motioned here please send your enquiries to enquiries@lehmanbrown.com

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