China to Defer Tax Payments for Manufacturing MSMEs, Coal-Fired Power Plants, and Heating Firms

Posted by Written by Zoey Zhang Reading Time: 2 minutes

The article was originally published on October 28, 2021 and updated on November 1, 2021.

  • Update: On October 29, 2021, the State Tax Administration and the Ministry of Finance have released the STA MOF Announcement [2021] No.30 and clarified the tax deferment policy for MSMEs (including sole proprietorships, partnerships, and individual businesses) in the manufacturing sector. The Announcement took effect on November 1, 2021.

China plans to allow small and medium-sized manufacturers, individual businesses, certain unincorporated firms like sole proprietorships and partnerships, as well as coal-fired power plants and heating firms to defer their tax payment for the fourth quarter.

The decision was made at an executive meeting of the State Council chaired by Premier Li Keqiang on October 27, 2021, as Beijing seeks to cushion the impact of rising commodity prices and production costs to help small businesses, especially manufacturers, tide over difficulties.

The meeting also decided to extend a tax break for overseas institutional investors investing in China bond market.

Tax deferment measures for manufacturers, individual businesses, unincorporated firms

According to the executive meeting, the following taxes for the fourth quarter of this year can be deferred:

Small and micro enterprises in the manufacturing sector (including individual businesses) whose annual sales revenue is less than RMB 20 million (US$3.13 million) can defer payments on all taxes for the fourth quarter.

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Medium-sized manufacturing enterprises with annual sales revenue between RMB 20 million (US$3.13 million) to RMB 400 million (US$62.51 million) can have 50 percent of their taxes deferred for the period. However, those with special difficulties can apply to the government for full tax delay.

According to the SAT MOF Announcement [2021] No.30, the annual sales revenue here refers to sales amount subject to VAT, including tax-declared sales amount, “sales amount added upon audit”, and “sales amount adjusted upon tax assessment”.

The tax reprieve will take effect on November 1, 2021. Taxes incurred in the fourth quarter (for taxpayers who pay tax quarterly), or in October, November, and December (for taxpayers who pay tax monthly) are allowed to be deferred payment for up to three months.

The measure is expected to result in deferred tax payment of RMB 200 billion (US$31.25 billion) for manufacturing MSMEs by the end of the application period in January next year, according to the State Council.

Tax deferment measures for coal-fired power companies and heating firms

The government will also permit coal-fired power plants and heating firms to postpone payment of their tax bills for the fourth quarter. These companies have been hit hard by soaring coal prices and curbs on electricity prices amid a power crunch.

The State Council said the measure may help defer tax payment of RMB 17 billion (US$2.66 billion) for coal-fired power companies and heat supply enterprises.

Extension of a tax break for overseas institutional investors

In addition, the meeting also decided to extend the period for exempting CIT and VAT on bond interest income earned by overseas institutional investors investing in the domestic bond market to December 31, 2025. The exemption, launched in 2018, was originally scheduled to expire in early November.

For more information and assistance on the application for deferred tax payment, please feel free to contact us at China@dezshira.com.

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