Small, Micro Enterprises in China Enjoy VAT&BT Exemptions

In July’s State Council meeting held by Chinese Prime Minister Li Keqiang, it was decided that all eligible small and micro-sized enterprises in the country will be temporarily exempted from value added tax (VAT) and business tax (BT) starting August 1, 2013. The policy is only temporary for now, but the State Council has announced that a similar long-term policy is currently being worked on.

This temporary policy basically allows eligible small and micro-sized enterprises to now enjoy the same tax policies as sole proprietorships, and the State Council has estimated that the new policy will benefit more than 6 million small and micro-sized enterprises with regards to employment and revenues. Specifically, it calls for small-scale VAT taxpayers and BT taxpayers (i.e., ones that achieve less than RMB20,000 in total monthly sales) to be exempted from VAT and BT beginning August 1.

It was also pointed out at the meeting that the large number of small and micro enterprises in China – most of which are private enterprises – are likely to play an important role in boosting the country’s economic development and also bolstering employment rates.

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