China has released a set of measures to support the eldercare and childcare industries as the government seeks to ease economic hardships for socially important businesses.
The National Development and Reform Commission (NDRC) and 12 other authorities jointly released the measures on August 29, 2022, called Several Policy Measures to Support the Elderly Care and Childcare Service Industries to Overcome Difficulties.
The measures consist of a number of policies that lower costs for eldercare and childcare service providers, including exemptions on rent, reductions on taxes and fees, and the provision of financial support.
They come as China faces the dual demographic challenges of an aging population and a declining birthrate, as well as short-term disruptions to the eldercare and childcare industries due to COVID-19.
Supportive measures for eldercare and childcare
The measures explicitly state that they are intended to assist the eldercare and childcare industries to overcome difficulties caused by the COVID-19 pandemic. They come in four main categories: rent, taxes and fees, social insurance, and financial support.
Besides these areas of support, the measures also state that the government will increase investments in the construction of eldercare and childcare facilities, including by providing local government bonds for such projects.
The supportive measures are summarized as follows.
Rent reductions and exemptions
Eligible eldercare and childcare service providers can receive an exemption on rentals of state-owned property through to the end of 2022. Eligible entities are micro, small, and medium-sized enterprises (MSMEs), as well as individual industrial businesses.
Lessors that reduce or exempt rent to eldercare and childcare service providers can enjoy a reduction or exemption of property tax and/or urban and township land use tax. The measures also encourage state-owned banks to give preferential treatment to such lessors when applying for loans.
They further encourage local and regional governments to explore other rent exemptions for eldercare and childcare service providers, including by offering such entities vacant public rental housing at a low price or free of charge.
Tax and fee reductions
The measures offer eligible eldercare and childcare service providers a reduction of up to 50 percent on “six taxes and two fees”. The six taxes are resource tax, urban maintenance and construction tax, property tax, urban and township land use tax, stamp tax (except for securities transactions), and farmland occupation tax. The two fees are the education surcharges and local education surcharges.
In another tax-cutting measure, eligible eldercare and childcare service providers can enjoy the large-scale value-added tax (VAT) rebates policy, under which qualified businesses can claim full refunds of incremental VAT credits on a monthly basis and claim one-off refunds of their remaining VAT credits in turn following a decided calendar.
Further, the measures reiterate that both eldercare and childcare service providers are eligible to benefit from the preferential tax policies specified in the Announcement of the Preferential Tax Policies for Elderly Care, Childcare, and Housekeeping Services, released in 2019. Institutions providing eldercare, childcare, and domestic services to the community shall enjoy preferential tax policies in accordance with the following provisions:
- The income obtained from providing community eldercare, childcare, and domestic service shall be exempted from VAT.
- The income derived from providing community eldercare, childcare, and domestic service shall be included in the total income by 90 percent when calculating the taxable income amount.
- Exemption from deed tax for housing and land used to provide community eldercare, childcare, and domestic service.
The electricity, water, gas, and heat used by eldercare and childcare institutions shall be at the rate for residential use, rather than the rate for commercial or industrial use. The residential usage rate is much lower. The measures also call on local governments to implement further incentives for eldercare and childcare service providers.
Eldercare and childcare service providers that have been hit by COVID-19-related difficulties can apply for a phased deferral of pension insurance, unemployment insurance, and work-related injury insurance payments. Eligible service providers can also apply for deferred payments of employee medical insurance for up to three months with no late payment fee.
Moreover, employees in the eldercare and childcare industry who individually join the pension insurance scheme by themselves can postpone their payments until the end of 2023 if they have difficulties in paying social insurance premiums. In addition, the measures direct local governments to continue to implement the policy of reducing unemployment and work-related injury insurance premiums.
The measures include several provisions designed to increase access to financing. These include directions to local governments to carry out and deepen the pilot program of relending for inclusive eldercare, and to support financial institutions in providing loans to inclusive eldercare service providers.
Further, the measures encourage governments to offer other means of financial support, such as by subsidizing loans, providing financing credit enhancement support, and providing liability insurance support.
Why eldercare and childcare are important for China
Assisting the eldercare and childcare industries is a priority for the Chinese government not just because they have been negatively impacted by COVID-19, but also because of their social importance.
China is one of the world’s most rapidly aging countries, and new childbirths continually lag behind the government’s goals. As a result of China’s skewed demographics, its working-age population will soon decline rapidly while the proportion of its dependent population – comprised of children and seniors – will increase.
The effects of China’s aging population are already being seen. People aged 60 and above account for at least one-fifth of the population in 13 of China’s 31 provincial-level regions. The problem is particularly acute in the north, where young people are leaving in favor of areas with better job opportunities.
Overall, 18.9 percent of China’s population was over age 60 in 2021. Meanwhile, the birth rate fell by 11.5 percent compared to 2020. Because of China’s demographic crunch, the government seeks to increase the accessibility of eldercare and childcare to tend to the country’s aging population and ease the costs of raising children.
Besides the supportive policies to assist eldercare and childcare service providers amid COVID-19, the government has released numerous policies to strengthen these industries in recent years. These include, among others, a Five Year Plan for the eldercare industry released earlier this year and the recent introduction of childcare leave. As such, government support for eldercare and childcare stands to extend beyond short-term policy support in the face of COVID-19.
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