China to offer tax reduction for small firms

The Ministry of Finance (MOF) announced on Tuesday that it has decided to lower tax burdens for small firms in an attempt to boost economic growth and employment.

Small firms with an annual taxable income of less than 100,000 yuan ($16,100) can now enjoy a 50 percent reduction of their annual taxable incomes and a tax rate of 20 percent, the ministry said in a statement.

Currently the corporate income tax rate for other firms on the Chinese mainland is 25 percent.

The new policy will last from January 1, 2014 to December 31, 2016.

Previously, the MOF had allowed small companies with an annual taxable income of no more than 60,000 yuan to have their income taxes halved from January 1, 2012 to December 31, 2015.

The announcement came after a State Council meeting chaired by Premier Li -Ke-qiang on April 2, which said the 60,000 yuan upper limit would be further raised and the policy would be extended to the end of 2016.

Micro and small-sized firms have faced with increasing difficulties given the complicated domestic and external economic environment, so they need further policy support, the MOF said.

The new policy will not only lower their tax burdens, but also help bolster economic growth and boost employment, it noted.

Heavy tax burdens and financing difficulty are major challenges faced by small and medium-sized enterprises, -China Everbright Bank and Beijing National Accounting Institute said in a report jointly released on March 26.