China Extends VAT Preferential Policy for Small-Scale Taxpayers to the End of 2020

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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 [2020] No.24).

This means that the preferential VAT policy addressed in the STA Announcement [2020] 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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