New tax cuts to spur economic dynamism were approved at the State Council’s executive meeting, presided over by Premier Li Keqiang, on Wednesday. Some pilot taxation incentives will be expanded, and the value added tax will be consolidated.
They are the first tax incentives since the two sessions legislative and advisory meetings, “and they must be fully implemented in a timely manner,” Li emphasized.
Tax burdens on businesses will be eased by about 350 billion yuan ($50.8 billion), a goal set in this year’s Government Work Report in March. The government will further streamline tax structures as part of a flatter and more transparent tax system.
Li promised to cut businesses’ taxes and the costs of internet, electricity and logistics by about 1 trillion yuan.
Wednesday’s meeting produced a series of tax measures:
• The nationwide value-added-tax reform will have a flatter structure. Starting in July, four VAT brackets will be streamlined into three, with tax rates of 17, 11 and 6 percent on different products.
• Tax incentives for small enterprises with limited profits are being applied to more companies between 2017 and 2019. Eligibility is extended to businesses with income under 500,000 yuan, instead of the previous 300,000.
• Pretax deductions for innovation-based tech firms will be expanded from 50 to 75 percent of primary research and development costs from 2017 to 2019.
• Tax incentives for venture capital firms will be available to fledging high-tech companies in eight designed locations as well as at Suzhou Industrial Park starting this year.
• Additional tax cuts for commercial health insurance will be applied nationwide, with an upper limit on deductions of 2,400 yuan per person.
It also was decided that a package of tax cuts that expired in 2016 will be available for the next three years.
The above measures are expected to cut taxes by 380 billion yuan this year.
China’s efforts to ease financial burdens for businesses are paying off, as figures released on Monday show GDP growth hit 6.9 percent for the first quarter, with investment picking up and retail rebounding.
“At the same time, we must drop unnecessary nontax charges … for enterprises for a greater competitive edge,” Li said.