China Plans to Cut RMB 380 Billion Taxes for Various Market Players

At the Executive Meeting held on April 19, 2017, the State Council of China issued six new tax reduction measures to further boost the substantive economic growth. First, from July 1, the 13% VAT bracket will be eliminated, leaving only three VAT brackets17%, 11%, and 6% in effect., and VAT rates for agricultural products and natural gas will be reduced from 13% to 11%. Second, for January 1, 2017 to December 31, 2019, the taxable income threshold for small-sized firms with thin profits will be raised from RMB 300,000 to RMB 500,000. Third, for January 1, 2017 to December 31, 2019, the proportion of pre-tax deduction for R&D expenses of technology-intensive small and medium-sized firms will be raised from 50% to 70% of such expenses. Fourth, venture capitals and individual investors located in nine designated zones will be allowed to deduct their taxable income by 70% of the amount invested in new technology-intensive firms. Fifth, individual taxpayers will be allowed to deduct healthcare insurance premium from their taxable income. Sixth, certain tax incentives that expired at the end of 2016 will be extended to the end of 2019. These tax measures are expected to cut more than RMB 380 billion of taxes in total for various market players in 2017.