On December 30^th, 2022, China Ministry of Finance and the State Administration of Taxation (STA) issued the Announcement No. 38 of 2022, which stipulates that from the date of this announcement to December 31^st, 2023, taxpayers producing and selling civil jet aircraft with an unladen weight greater than 25 tons shall be implemented in accordance with the Article 2, 5 and 7 of the Announcement on Taxation Policies for Civil Aircraft Engines, New Regional Aircraft and Large Passenger Aircraft (Ministry of Finance and STA Announcement No. 88, 2019) and the Article 1 of the Announcement on Extending the Implementation Period of certain Tax Preferential Policies (Ministry of Finance and STA Announcement No. 6, 2021).

In particular, the Ministry of Finance and STA Announcement No. 88, 2019, provides a temporarily reduction of VAT at 5% on the taxpayers' production and sales of new regional aircraft, and the VAT amount retained at the end of the period arising from their production and sales of new regional aircraft shall be refunded.

The closing VAT credit amount that meets the requirements can be refunded in a lump sum upon the initial application for tax refund and consequently, the taxpayers shall offset or refund the tax deducted from the corresponding tax payable.

In addition, the expired implementation period of the tax incentives under the Notice on Enterprises Income Tax Policies Relating to Equipment and Apparatus Deduction (Cai Shui [2018] No. 54) and other 16 documents, has been extended to December 31^st, 2023, which means that enterprises that have newly purchased equipment and appliances with a unit value not exceeding RMB 5 million between January 1^st, 2018 and December 31^st, 2023, are allowed to request a lump sum deduction in the calculation of taxable income, and the depreciation will no longer be calculated in annual instalments. In case the value of the unit exceeds RMB 5 million, it is still subject to the implementation regulations of the Enterprises Income Tax and the Notice on Further Improving the Policy on Accelerated Depreciation of Fixed Assets for Enterprise Income Tax (Cai Shui [2015] No. 106) and other relevant regulations, but enterprises could choose whether to adopt the method of accelerated depreciation or not.

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