On May 29th 2022, the Shanghai Municipal Government announced various measures ("measures") to revive growth and stimulate the economy impacted by the lockdown restrictions, lifted on the 1st June. The key measures are summarized below.

Deferring social insurance payment for enterprises engaged in catering, retail, tourism, aviation, road, waterway and rail transportation

The payment of social insurance will be deferred for enterprises engaged in the catering, retail, tourism, aviation, road, waterway, and rail transportation industries. The deferral is stipulated as follows: 

• Payment of pension and medical insurance can be deferred until the end of 2022

• Payment of unemployment and work-related injury insurance can be deferred for a period of up to one year

Reduction or Exemption of Rent

• Small and micro-sized enterprises and individual businesses that rent state-owned property may be exempted from rental payments for up to six months.

• Non-state-owned property owners that reduce rent for small and micro-sized enterprises and individual businesses that lease their property may obtain a subsidy of 30 percent of the total rent waived, which would be capped at RMB 3 million.

Extension of Tax Filing Deadline 

The tax filing deadline for April, May and June has been extended to June 30th, 2022. The deadline for corporate income tax filing for 2021 has also been extended to June 30th, 2022. Taxpayers who still have difficulties settling their tax liabilities at this time may either apply for an extension of filing declaration or a deferral of tax payments for up to three months to the competent tax authorities. 

Proposed Expansion of VAT Credits Refund and Tax Reduction Measures

The measures call for further expansion of the VAT credits refund to more industries. 

Currently, all enterprises in the following six industries, as well as small and micro-sized enterprises can apply for VAT credits refund:

• Manufacturing;

• Scientific R&D and technology services;

• Electricity, heating, gas, and water production and supply;

• Software and information technology services;

• Ecological protection and environmental governance;

• Transport, logistics, warehousing, and postal.

The measures call on an expansion from the six industries listed above to include further industries.

Moreover, qualified enterprises may apply for the reduction or exemption of the second and third quarter real estate tax and urban land use tax on self-owned property and land. However, enterprises engaging in certain restricted or discouraged industries may not be eligible. 

Labor-related Subsidies

Enterprises in industries that are hard-hit by the Covid-19 pandemic, such as catering, retail, tourism, transport, hospitality, and exhibitions are eligible for subsidies if they do not lay off or only lay off a small number of employees. These enterprises are eligible for subsidies of RMB 600 for each employee, capped at RMB 3 million per company. 

Enterprises can also be eligible for a one-time subsidy of RMB 2,000 for each new recruit who has been unemployed for over three months or for new graduates employed in 2022 from universities in Shanghai. To qualify for the subsidy, enterprises must sign a labor contract of at least one year with the aforesaid employees and pay social insurance. 

Our Observations

These measures implemented by the Shanghai Municipal Government are set in place in order to assist businesses with their post-lockdown recovery and operations. If you would like to know more about the most recent tax and financial developments in China, as well as applicability and exact details of the support measures, please contact us at info@phcadvisory.com.