Self-Employed Cry Out... Chinese Authorities Push Tax Cut Plan

Frozen Domestic Demand and Investment Revival

The Chinese government has introduced a five-year tax reduction policy as the number of small business owners going out of business due to the economic downturn increases. This move aims to stimulate domestic demand and attract corporate investment amid growing concerns about a hard landing of the Chinese economy.

On the 2nd, the Ministry of Finance of China released the "Tax Policy Announcement for Supporting the Development of Small Enterprises and Individual Industrial and Commercial Households (self-employed)."

Enterprises with annual taxable income of 3 million yuan (approximately 540 million KRW) or less, fewer than 300 employees, and total assets of 50 million yuan (approximately 9 billion KRW) or less will be eligible for this tax benefit.

From this year until 2027, the Chinese government will also reduce personal income tax by half for self-employed individuals with annual taxable income below 2 million yuan (approximately 360 million KRW).

[Image source=Yonhap News]

The Ministry of Finance also announced that resource tax, urban maintenance and construction tax, real estate tax, land use tax, stamp duty, cultivated land occupation tax, and local education surtax on value-added tax for taxpayers who pay less VAT, small enterprises, and self-employed individuals will be halved for five years. However, water resource tax and securities transaction stamp duty are excluded from these tax benefits.

Additionally, the policy to calculate taxable income for small enterprises at 25% less and to apply a 20% corporate income tax rate will be extended until the end of 2027.

At the annual meeting held last month chaired by General Secretary Xi Jinping of the Central Political Bureau of the Communist Party of China, the recent economic difficulties were attributed to insufficient domestic demand, operational difficulties of enterprises, and real estate risks. The stance was expressed that "active fiscal policy and stable monetary policy should continue, and tax reduction and administrative business cost reduction policies must be implemented."

This content was produced with the assistance of AI translation services.