Author: daniela.pilia

Obtaining Tax Refund of Incremental Tax Credits

Taxpayers who meet the following conditions at the same time may apply to the competent tax authority for refund of incremental tax credits*:

– Since the tax period of April 2019, the incremental tax credits for six consecutive months (for quarterly tax payments, two consecutive quarters) are greater than zero, and the incremental tax credits for the sixth month are not less than 500,000 yuan;
– Tax credit rating is A or B;
– In the 36 months prior to the application for tax refund there has been no case of fraudulently obtaining tax refunds, export tax refunds or falsely issuing special VAT invoices;
– No punishment twice or more by the tax authorities for tax evasion 36 months before applying for tax refund;
– Since 1 April 2019, those who have not enjoyed the policy of immediate refund or refund after collection.

*The term “incremental tax credits” as mentioned here refers to the newly added tax credits at the end of the period compared with the end of March 2019.

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CIT Deduction for Small and Medium Entrerprises Purchasing Equipment

On 4 March 2022, the Ministry of Finance (MOF) released Announcement no. 12 on “Pre-tax Deduction of Taxable Corporate Income on Micro, Small and Medium-sized Enterprises for the Purchase of Equipment”. According to the announcement, small and medium-sized enterprises purchasing new equipment with a unit value of more than 5 million RMB, during the period from 1 January 2022 to 31 December 2022, a portion of the cost of the equipment can be deducted when declaring Corporate Income Tax. For equipment with a minimum depreciation period of 3 years, the amount that can be deducted is 100% of the unit value; for equipment with a minimum depreciation period of 4, 5, and 10 years, the amount that can be deducted is 50% of the unit value.

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Salary Payment Regulations During Shanghai Lockdown

According to the Notice “Concerning Properly Handling Labor Relations during the Prevention and Control of the Outbreak (No.8 [2020])”, companies whose operations are suspended for less than a monthly salary payment cycle must pay their employees the full regular salary. If the suspension of operation exceeds a month’s salary payment cycle and there is no possibility to work remotely, or if employees cannot return to their positions due to the pandemic control measures, employers may negotiate with employees to use annual leave or another type of leave, with employees compensated according to the provisions of that leave. In the event that there is no leave to be used and the employees are still unable to work normally, companies can still negotiate with employees to reduce the monthly salary but must still pay the local minimum wage, which in Shanghai is RMB 2590. For the second month’s salary payment cycle the company should pay at least the minimum expenses equal to 80% of minimum salary (80% *2590).

Regarding social welfare, Shanghai will continue to implement Circular No. 11 issued by the Ministry of Human Resources and Social Security on “Reducing social insurance contribution rate during lockdown” related to unemployment and medical insurance contribution rate. This provides for refunding 50% of the unemployment insurance premium and lowering the employees’ medical insurance contribution rate by 0.5%.

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Measure to Help Enterprises Affected by the Pandemic

On 29 March 2022, the Shanghai Municipal Government issued several measures to support micro, small and medium enterprises impacted by the recent pandemic outbreak in Shanghai, to help them survive and recover after the pandemic-related lockdown. Here some details.

Measures to Support Service Sector: Additional VAT deductions and VAT exemption, reduction of social insurance costs related to unemployment and medical funds, reduction or exemption of real estate tax and urban land use tax, government fund to support rent exemption in high-risk areas, pre-tax deduction of income tax for new machinery, credit support to micro-small-medium size enterprises, reduction of bank fees, subsidy for Covid-tests, financing guarantee lowered, tolerance for non-performing loans, facilitate registration of new companies and whole process of procedures for enterprise modification and cancellation.

Enterprises engaged in cultural, sports, tourism and catering sectors will continue to be eligible for an additional VAT deduction of 15% till 31 December 2022.

For the tourism sector the supply of credit will be increased for “A” level tourist attractions, rural tourism operators, resorts, star rated hotels and travel agencies.
For the catering sector: take-away and internet platform will reduce service fees and will refund the commissions.

For the transportation sector: financing support to transport enterprises, advance payment of VAT by air transport enterprises is suspended for 1 year; transfer of funds to support airlines and airports; financial support for civil aviation infrastructure development; promote cancellation of marine transportation premium and port charges included in the price of aviation kerosene.

Rent Support: Small-micro enterprises and commercial households that rent state-owned facilities are exempted from rent for 3 months in 2022. Enterprises located in Covid high-risk areas and whose business activities are seriously affected by the implementation of pandemic prevention requirements will be eligible for a further 3 months of rent exemption. For private-owned facilities the government encouraged the property owners to support the tenants with rent deductions.

Extension of tax filing deadline: The tax filing deadlines of April and May are postponed from 29 April to 31 May 2022. Taxpayers that still have difficulties in filing tax on time due to the impact of the pandemic may apply for further extension of the declaration.

VAT Exemption: On 24 March 2022 the State Administration of Taxation and the Ministry of Finance published Announcement no.15 on “Exemption of VAT for small scale taxpayers”, according to which from 1 April, 2022 to 31 May 2022 small-scale VAT taxpayers subject to 3% VAT tax rate on their sales revenue will be exempt from VAT. Small-scale is normally defined as an annual VAT taxable sales not exceeding RMB 5 million.

VAT Refund: Starting from 1 April 2022 small-scale enterprises engaged in manufacturing, scientific research, electricity, heat, gas, and water supply, software and information technology services, ecological protection and environmental governance, transportation, storage, and delivery services will be able to apply for VAT credit refund on a monthly basis (previously only available to companies in the advanced manufacturing industry).

Additional Tax Exemption: Exemption from paying urban maintenance and construction tax, real estate tax, urban land use tax, stamp tax (excluding securities transaction stamp tax), land occupation tax, education surcharge and local education surcharge. This tax benefit was originally applicable from 1 January 2019 to 31 December 2021, but the policy has now been extended to 31 December 2024.

Please contact us for further details on any of these measures.

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Fujian Extends 15% CIT for Enterprises till 2025

According to the Notice on the Corporate Income Tax Preferential Policy in the Pingtan Comprehensive Pilot Zone (Cai Shui [2021] No.29, qualified enterprises established in Fujian Pingtan Comprehensive Pilot Zone are eligible to enjoy a reduced corporate income tax (CIT) rate of 15% (instead of the standard CIT rate of 25%t) until 31 December 25.

Qualified enterprises must be involved in one of the follow business sectors: high-tech, services, agricultural and marine industry, ecological and environmental protection, infrastructure management, tourism, modern logistics, technology and information service and the income from the main business must account for more than 60% of the company’s total income.

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Hong Kong Statutory Holidays to Increase Gradually from 12 to 17 Days

The Hong Kong Legislative Council has passed the Employment (Amendment) Bill 2021, which adds progressively five days to the list of statutory holidays. Starting from 1 January 2022, one holiday will be added every 2 years as follows:

	Statuary Holidays to be added under the Amendment Bill	Effective Date
1.	Birthday of the Buddha, being the 8th day of the 4th lunar month	1 January 2022
2.	First weekday after Christmas Day	1 January 2024
3.	Easter Monday	1 January 2026
4.	Good Friday	1 January 2028
5.	The day following Good Friday	1 January 2030

 

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China Implements Revised Requirements for Food Importers and Exporters

On 13 April 2021, the General Administration of Customs of China (GACC) issued No. 248 and No. 249 orders, which deal with “Administrative Regulations on the Registration of Overseas Manufacturers of imported Food of the People’s Republic of China” and “Administrative Measures on import and Export Food Safety of the People’s Republic of China” respectively.

Order No. 248 stipulates that all overseas production enterprises of imported food need to be registered and it changes the registration method and the application materials, as well as imposing new packing and labeling requirements.

Order No. 249 stipulates requirements for overseas facilities registration, record filing by importers and exporters, quarantine and inspection, and product labeling, among others. It also introduces the concept of a conformity assessment, which covers the evaluation of foreign food safety management systems, the registration of overseas food export facilities, and required record filing by importers and exporters.

The two regulations were implemented on 1st January 2022 and are very important for overseas manufacturers wishing to export foods to China.

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SAT Details Repair of Taxpayer Credit

China’s State Taxation Administration recently released the Announcement [2021] No.31 on “Matters Relating to the Evaluation and Repair of Taxpayer Credit”, implemented on 1 January 2022.

According to the announcement, there are five circumstances under which a taxpayer may apply to the tax authorities in charge for the “restoration/repairing” of its taxpayer credit, namely after it has corrected dishonest behaviour, performed its legal tax liabilities, is waived from the release of its major tax violating information, and has recorded no dishonest tax payment behaviour for six or 12 months.

After completing the repair, the taxpayer can apply the corresponding tax policies and management services based on the repaired tax credit.

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Trademark Certificates Go Paperless

Starting from January 2022 China’s National Intellectual Property Administration will no longer provide paper trademark registration certificates. Applicants will receive the “Notice of obtaining trademark registration certificate” and can download online the electronic trademark certificate according to the website and password in the notice.

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China Reduces Import Tariffs on 954 Commodities in 2022

According to the circular released by the Customs Tariff Commission of the State Council, from 1st January 2022 import tariffs on certain medical products such as intracranial embolization stents and artificial joints will be reduced and zero tariffs will be imposed on the new anti-cancer drug radium chloride.

Reductions also apply to ski gear and equipment, artworks, auto parts that help reduce greenhouse gas emissions, high-voltage cables for high-speed trains, fuel-cell components, infant clothing, dishwashers, and high-quality aquatic products such as salmon and cod.

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