China Extends VAT Preferential Policy for Small-Scale Taxpayers to the End of 2020
On May 7, 2020, China’s State Taxation Administration (STA) and Ministry of Finance (MOF) announced the extension of the preferential value-added tax (VAT) policy for small-scale taxpayers to December 31, 2020 (see STA Announcement  No.24).
This means that the preferential VAT policy addressed in the STA Announcement  No.13, which was rolled out earlier on February 28 and was supposed to expire on May 31, 2020 – will thus continue benefiting small-scale VAT taxpayers until the end of this year.
The policy, now effective from March 1, 2020 to December 31, 2020, is applicable to small-scale taxpayers nationwide. Measures are slightly different for taxpayers inside and outside Hubei province, the epicenter of the coronavirus outbreak.
For small-scale taxpayers in Hubei province
- The small-scale taxpayers to which a VAT levy rate of 3 percent is applicable can be exempted from VAT; and
- The pre-payment VAT on items subject to a pre-levy VAT rate of 3 percent can be suspended.
For small-scale taxpayers outside Hubei province
- The small-scale taxpayers can pay VAT on their taxable sales subject to a levy rate of 3 percent at a reduced rate of 1 percent; and
- The pre-payment VAT on items subject to a pre-levy VAT rate of 3 percent can be levied at a reduced rate of 1 percent.
The announcements are aimed to support individual businesses and micro and small firms to carry on businesses amid the COVID-19 outbreak. Extending the VAT relief for another seven months will reduce financial burdens of small business and may even promote employment.
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