Small and Low-profit Enterprises Accessible to Preferential One-year Tax Treatment
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Small and Low-profit Enterprises Accessible to Preferential One-year Tax Treatment
Author:Xinchengda   Article source: Shenzhen Xinchengda Financial Consultancy Co., Ltd.  Hits:1551  Add time:2010-2-25  
In 2010, the small and low-profit enterprises will have 50% of their income taxes levied as the taxable incomes and pay their income taxes at a rate of 20%
 
  Recently, the Ministry of Finance and the State Administration of Taxation have issued the Circular concerning the Policy on Small and Low-profit Enterprises' Corporate Income Tax. In accordance with the Circular, small and low-profit enterprises with a taxable income of less than RMB 30,000 (inclusive) shall, within a period from January 1, 2010 to December 31, 2010, have 50% of their income taxes levied as the taxable incomes and pay their income taxes at a rate of 20%. Meanwhile, the Circular stipulates that small and low-profit enterprises refer to those enterprises eligible according to the Enterprise Income Tax Law along with the rules for implementation, as well as related tax policies.
  The financial and tax authorities introduce this favorable tax treatment policy for small and low-profit enterprises when our national economy suffers a strong impact from global financial crisis and the small and medium-sized enterprises (SMEs) have much trouble in production and operation. According to some tax experts, the SMEs play a significant role in promoting the development of our national economy and boosting the market prosperity. Current classification standard shows that the SMEs constitute a vast majority of about 10 million enterprises which have gone through the industrial and commercial registration across China. Actually, GDP attributable to these enterprises account for over 60% of the total.
  The SMEs have developed into the industrial clusters and also the main force of technical innovation. Moreover, they serve as a major employment channel in that they've provided over 80% job opportunities in the urban areas, not only solving the employment problems of many laid-off workers in the cities, but also absorbing lots of surplus rural laborers. In other words, they're playing an increasingly significant role in easing employment pressure and maintaining social stability.
  The experts also state that the SMEs have encountered many problems during current national economic development, especially under the impact of global financial crisis, mainly including: financial shortage, limited financing channels, and hard access to loans, which resulted in inadequate direct financing of SMEs; radical decrease in orders due to the noticeable decline in demands caused by the world economy downturn and consequent considerable challenge for export; and increase in the enterprise cost of export-oriented SMEs due to the increasing pressure on RMB appreciation and consequent small profit margin
  In recent years, the government has attached much importance to the healthy development of SMEs. The taxation authorities have also adopted a series of policies and measures to help them overcome their difficulties. First of all, a variety of special funds are established to support their development. In 2009, the central budget set several special funds, such as the technical innovation fund of high-tech SMEs, to support their technical innovation, credit guarantee, industrial upgrading, market exploration, and improve their development environment. In the meantime, the local budget also provided more supports for SMEs. Secondly, special preferential taxation policies are practiced to ease their tax burden. According to the Enterprise Income Tax Law, the small and low-profit enterprises, once confirmed as eligible, can pay their income taxes at a rate of 20%, and the VC-backed companies which invest in the high-tech SMEs can enjoy the preferential tax treatment. The VAT bearing rate for small tax payers is lowered from 4% and 6% to 3%. Since the second half of 2008, the central government has adjusted the export rebate rate for seven times and raised the export rebate rate for some labor-intensive goods. Thirdly, the administrative fees are cleared up. Since September 1, 2008, the management fees of individual industrial and commercial households and marketplace management fees shall not be collected. Since January 1, 2009, 100 administrative fees related to SMEs shall be cancelled. Finally, the special social security policy is provided for some enterprises in difficult operation, including SMEs.
  According to some experts, implementation of these policies will significantly facilitate the SMEs' development and relieve their pressures in production and operation. Yet, China's SMEs, small enterprises in particular, still face considerable difficulties, and need further supports from national policy. The preferential policy jointly issued by the financial and tax authorities is expected to play a positive role
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