Good news! The Ministry of Finance and the State Administration of Taxation successively released the Enterprise | Technology oriented | Ministry of Finance

Recently, the Central Political Bureau meeting called for the continuation, optimization, improvement, and implementation of tax reduction and fee reduction policies. Recently, the Ministry of Finance and the State Administration of Taxation have issued six tax and fee preferential documents, continuing to improve relevant policies and supporting the development of small and micro enterprises, individual businesses, and start-up technology-based enterprises.

The relevant policies involve multiple types of taxes such as value-added tax, corporate income tax, personal income tax, and education surcharges. For example, for individual industrial and commercial households whose annual taxable income does not exceed 2 million yuan, personal income tax shall be reduced by half; Reduce resource tax, urban maintenance and construction tax, property tax, urban land use tax, stamp tax, farmland occupation tax, education surcharge, and local education surcharge by half for small-scale value-added tax taxpayers, small and micro profit enterprises, and individual industrial and commercial households; Reduce the taxable income of small and micro profit enterprises by 25% and pay corporate income tax at a rate of 20%.

6 policies support the development of small and micro enterprises, individual businesses, and start-up technology enterprises

According to the website of the State Administration of Taxation, the Ministry of Finance and the State Administration of Taxation have issued six tax and fee preferential documents, namely the Announcement on Further Supporting the Development of Small and Micro Enterprises and Individual Businesses related to Tax and Fee Policies, the Announcement on Supporting the Financing of Small and Micro Enterprises related to Tax Policies, the Announcement on Exempting Value added Tax on Loan Interest Income of Financial Institutions for Small and Micro Enterprises, the Announcement on Continuing the Implementation of Value added Tax Policies for Financing Guarantee of Farmers, Small and Micro Enterprises and Individual Businesses, the Announcement on Reducing Value added Tax Policies for Small scale Taxpayers of Value added Tax, and the Announcement on Continuing the Implementation of Policy Conditions for Entrepreneurship Investment Enterprises and Angel Investment Individuals to Start up Technology Enterprises.

Rong Hailou, Director of the Revenue Planning and Accounting Department of the State Administration of Taxation, recently stated that continuing to optimize and innovate the implementation of tax and fee preferential policies is a major decision made by the Party Central Committee and the State Council to focus on stimulating market vitality, stabilizing market expectations, and boosting market confidence. In the first half of 2023, a total of 927.9 billion yuan in new tax reductions and deferred tax refunds were added nationwide. Among them, small and medium-sized enterprises benefited the most, with 576.6 billion yuan in new tax reductions and deferred tax refunds, accounting for 62%.

As an important entity of the real economy, safeguarding the sustainable development of small and medium-sized enterprises is a necessary part of consolidating the foundation of economic recovery and maintaining economic vitality and resilience. At present, multiple tax and fee preferential policies for small and micro enterprises and individual businesses will expire at the end of this year. In order to further support the development of related enterprises, the Ministry of Finance and the State Administration of Taxation have extended the relevant preferential policies until December 31, 2027.

Specifically, the relevant policies involve multiple types of taxes such as value-added tax, corporate income tax, personal income tax, and education surcharges

1. For individual industrial and commercial households whose annual taxable income does not exceed 2 million yuan, personal income tax shall be reduced by half.

2. Reduce resource tax, urban maintenance and construction tax, property tax, urban land use tax, stamp tax, farmland occupation tax, education surcharge, and local education surcharge by half for small-scale value-added tax taxpayers, small and micro profit enterprises, and individual industrial and commercial households.

3. For small and micro profit enterprises, the taxable income shall be calculated at a reduced rate of 25%, and the corporate income tax policy shall be paid at a rate of 20%.

4. The interest income obtained from small loans issued by financial institutions to small enterprises, micro enterprises, and individual businesses is exempt from value-added tax.

5. Small scale value-added tax taxpayers with monthly sales below 100000 yuan are exempt from value-added tax.

6. Taxpayers are exempt from value-added tax on the guarantee fee income obtained from providing financing guarantees for loans and issuing bonds to farmers, small enterprises, micro enterprises, and individual industrial and commercial households, as well as the re guarantee fee income obtained from providing re guarantees for the aforementioned financing guarantees.

Sun Kunpeng, Associate Professor at the School of Finance and Taxation at Central University of Finance and Economics, pointed out in an interview with Securities Times that the policies issued by the Ministry of Finance and the State Administration of Taxation cover multiple aspects of financing and production operations for market entities such as small and micro enterprises and individual businesses, covering value-added tax, income tax, resource tax, urban maintenance and construction tax, property tax, urban land use tax, stamp tax, and farmland occupation tax. Especially focusing on the financing issues of small and micro enterprises can have a direct effect on alleviating the difficulty of enterprise financing and restoring the vitality of market entities.

For example, the Announcement on the Policy of Exempting Value Added Tax on Interest Income from Loans to Small and Micro Enterprises by Financial Institutions proposes to exempt value-added tax on interest income obtained from small loans issued by financial institutions to small enterprises, micro enterprises, and individual businesses, and clarifies the two interest deduction methods that financial institutions can choose.

Sun Kunpeng pointed out that according to the loan market quoted interest rate of 150% published by the National Interbank Funding Center, it is possible to choose to apply it according to the interest rate of each loan separately, or to divide a loan into two parts below and above the standard for application. Flexible deduction methods and incentives are provided for financial institutions, and small loans issued to small and micro enterprises can have a tax reduction effect, which helps reduce the loan costs of financial institutions and effectively alleviate the financing difficulties of small and micro enterprises.

Continuation of tax incentives for venture capital enterprises, angel investors, and individuals investing in start-ups and technology-based enterprises

In order to further support entrepreneurship and innovation, the Announcement on Continuing the Implementation of Policies and Conditions for Entrepreneurship Investment Enterprises and Angel Investment Individuals to Invest in Start up Technology based Enterprises is based on the Notice on Tax Policies for Entrepreneurship Investment Enterprises and Angel Investment Individuals. For the conditions that startups technology based enterprises need to meet, it is required that the number of employees should continue to be no more than 300, and the total assets and annual sales revenue should not exceed 50 million yuan. The relevant policies will continue until December 31, 2027.

According to Document No. 55 of Finance and Taxation [2018], if a start-up technology-based enterprise has been holding equity for at least 2 years, 70% of the investment amount can be deducted from the taxable income of the company's start-up investment enterprise in the year of holding equity for at least 2 years. Angel investors who invest directly in a start-up technology enterprise through equity investment for at least 2 years can deduct 70% of the investment amount from the taxable income obtained by transferring the equity of the start-up technology enterprise.

Sun Kunpeng pointed out that the Finance and Taxation [2018] No. 55 document clarifies the tax incentives for angel investors to invest in startups, as well as the conditions that enterprises should meet. At that time, the limited conditions were mainly "the number of employees should not exceed 200" and "the total assets and annual sales revenue should not exceed 30 million yuan" in the conditions for start-up technology-based enterprises. After the policy was issued, it effectively promoted entrepreneurship and innovation, and improved employment levels.

On this basis, the applicable standards have been further relaxed in the Finance and Taxation [2019] No. 13 document, where "the number of employees does not exceed 200" has been adjusted to "the number of employees does not exceed 300", and "the total assets and annual sales revenue do not exceed 30 million yuan" has been adjusted to "the total assets and annual sales revenue do not exceed 50 million yuan". Further leverage the promoting role of tax incentives for angel investment. However, the application period of the Finance and Taxation [2019] No. 13 policy has ended on December 31, 2021.

Sun Kunpeng believes that the current Announcement on Continuing the Implementation of Policy Conditions for Entrepreneurship Investment Enterprises and Angel Investment Individuals to Invest in start-ups and technology-based enterprises reaffirms the relaxed conditions for enterprises, and the application period is relatively long, which will serve as a "fuel bag" and "reassurance pill" for angel investors. It is expected to promote the activity of angel investment, thereby promoting innovation and entrepreneurship activities, effectively improving employment, and promoting high-quality economic development.