On February 21, 2025, the Shanghai Municipal Government released a series of significant policies aimed at reducing corporate operating costs, boosting market confidence, and driving economic recovery. These measures cover key areas such as taxes, costs, and financing, bringing tangible benefits to businesses.

I. Tax Optimization: Reducing Burden and Providing Incentives

Shanghai has implemented multiple measures to reduce the tax and fee burden on enterprises. These policies not only alleviate the financial burden on businesses but also promote industrial upgrading and innovation through tax incentives.

1. Value-Added Tax and R&D Expense Deductions
Shanghai continues to implement national structural tax reduction policies, including VAT carry forward refund and additional deductions for VAT in advanced manufacturing industries. Additionally, enterprises in integrated circuits and industrial mother machines can enjoy additional deductions for R&D expenses and VAT. These measures directly reduce the tax burden on enterprises while encouraging them to increase R&D investment and enhance core competitiveness.

2. Halving of "Six Taxes and Two Fees"
For small-scale VAT taxpayers, small and micro-profit enterprises, and individual businesses, Shanghai continues to halve the collection of "six taxes and two fees," including resource tax, urban maintenance and construction tax, and property tax. The continuation of this policy provides stable tax preferential expectations for small and medium-sized enterprises, helping to alleviate financial pressure and stabilize operations.

3. Reducing Registration Fees for Pharmaceuticals and Medical Devices
Shanghai continues to implement national structural tax reduction policies, including VAT carry forward refund and additional deductions for VAT in advanced manufacturing industries. Additionally, enterprises in integrated circuits and industrial mother machines can enjoy additional deductions for R&D expenses and VAT. These measures directly reduce the tax burden on enterprises while encouraging them to increase R&D investment and enhance core competitiveness.

II. Cost Control: Comprehensive Cost Reduction and Efficiency Improvement

In addition to tax optimization, Shanghai is helping enterprises reduce costs and improve operational efficiency from multiple dimensions, including labour, energy, and financing.

1. Reducing Labor Costs
Starting from March 2023, Shanghai continues to temporarily reduce the employer contribution rate for employee medical insurance by 1 percentage point and the unemployment insurance rate by 0.5 percentage points. Additionally, a social security subsidy policy for maternity and parental leave for female employees has been implemented, with eligible units able to apply for a 50% subsidy. These measures directly reduce the human resource costs for enterprises and enhance flexibility in human resource management.

2. Reducing Energy Costs
In terms of energy costs, Shanghai has reduced electricity costs for enterprises through policies such as improving non-grid direct supply electricity prices, lowering the surcharges in industrial parks, and optimizing electricity purchase plans. Meanwhile, gas companies have cancelled the surcharge policy for some users, and water costs have been controlled by waiving the progressive surcharge for water fees exceeding the quota. These measures not only reduce the operating costs of enterprises but also promote green and sustainable development through optimized energy management.

3. Reducing Financing Costs
Difficulties in financing and high financing costs have long been pain points for small and medium-sized enterprises. Shanghai has provided stronger financial support for enterprises by increasing credit supply, optimizing guarantee loan policies, and implementing loan interest and fee subsidies. In particular, the optimization of the "seamless rollover" mechanism has extended the rollover policy to medium-sized enterprises, providing stable financial chain support for businesses.

The 21 measures released by the Shanghai Municipal Government have brought tangible cost reductions for enterprises. From tax optimization to cost control, these policies not only alleviate the short-term financial pressure on enterprises but also lay a solid foundation for long-term development.

At PHC Advisory, we can offer you full support on matters regarding doing business in China, or any other issues your business may face. If you would like to know more about policies relevant to your business in Italy or Asia, please contact us at info@phcadvisory.com.  

PHC Advisory is a company of  DP Group: an international professional services conglomerate of companies with approximately 100 experienced professionals worldwide. We offer comprehensive services in tax, accounting, and financial consulting, including financial supervision, financial audit, internal audit, internal control over financial reporting, and support for audited financial statements and annual audits, ensuring clients' financial transparency and compliance. 

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