Beneficial policies: VAT threshold for small-scale taxpayers increased, Partial income tax halved

On March 5th, 2021, the Fourth Session of the 13th National People's Congress opened in the Great Hall of the People in Beijing with Premier Li Keqiang making a grandiose report on the work of the government.


In the report, it was announced that the VAT threshold for small-scale taxpayers has been raised from RMB 100,000 per month to RMB 150,000! For small and micro enterprises and individual entrepreneurs with an annual taxable income of less than RMB 1 million, income tax will be reduced by half, on top of the already existing preferential policies.


The starting point of monthly sales of VAT for small-scale taxpayers in China has been continuously raised from the initial monthly sales of RMB 10,000 to RMB 30,000, and is currently implemented as stipulated in Cai Shui [2019] No. 13, which exempts small-scale VAT taxpayers with monthly sales of up to and including RMB 100,000 from VAT.


Small-scale taxpayers refer to taxpayers whose annual leviable VAT sales do not exceed RMB 5 million.


The main preferential content of Caishui [2019] No. 13 document is as follows:


1)     If monthly sales do not exceed RMB 100,000 (1 quarter is a tax period, the quarterly sales do not exceed RMB 300,000), VAT shall be exempt;


2)     If the monthly sales exceed RMB 100,000 but do not exceed RMB 100,000 after deducting the sales of real estate incurred during the period, sales of goods, services and intangible assets are exempt from VAT;


3)     The rental income obtained by other individuals from renting out real estate in the form of a lump-sum rental can be divided equally during the corresponding lease period. The monthly rental income after the division does not exceed RMB 100,000, then its value-added tax is exempted.


The government work report has proposed to increase the monthly sales exemption point to RMB 150,000, so that more taxpayers will enjoy this preferential treatment to a greater extent.


If the annual taxable income of small and low-profit enterprises does not exceed RMB 1 million, with the actual tax burden currently only 5%, according to the government work report, the tax burden will only be 2.5% after the halving is imposed.


Self-employed businessmen do not pay corporate income tax in accordance with the regulations, but individual income tax. According to the current collection and management methods, most self-employed businesses adopt a regular fixed levy or an approved levy. The rate of the tax burden is already not very high, but it will be even lower after the halving of the levy!


At PHC Advisory, our team is constantly monitoring the most recent developments and incentives accessible to businesses in China. Feel free to reach out to us at to find out more about preferential policies in China that your company may benefit from.

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