Announcement by the Ministry of Finance and State Taxation Administration on Further Supporting the Development of Small and Micro Enterprises and Individual Industrial and Commercial Households with Relevant Tax and Fee Policies

01 Policy overview

What does the policy mainly clarify?

The announcement clarifies that from January 1, 2023 to December 31, 2027, individual industrial and commercial households may have individual income tax halved on the portion of annual taxable income not exceeding 2 million yuan, and three types of entities may enjoy a 50% reduction on "six taxes and two fees"; the corporate income tax preference for small low-profit enterprises is extended to the end of 2027.

The following "Kailing Practical Key Points" are for assisting understanding. For official content, please refer to the original text and source links later on the page.

02 Applicable objects

Which enterprises and transactions need attention?

For individual businesses, from January 1, 2023 to December 31, 2027, individual income tax is reduced by half on the portion of annual taxable income not exceeding 2 million yuan; on the basis of enjoying other current individual income tax preferential policies, this preference can be enjoyed cumulatively.

Small-scale VAT taxpayers, small low-profit enterprises, and individual industrial and commercial households may, during the above period, halve the collection of resource tax, urban maintenance and construction tax, property tax, urban land use tax, stamp duty, farmland occupation tax, education surcharge, and local education surcharge. Other preferential policies for these taxes and fees already enjoyed in accordance with the law may still be enjoyed cumulatively with the preferences in this announcement.

Small low-profit enterprises must engage in industries not restricted or prohibited by the state, and simultaneously meet the conditions of annual taxable income not exceeding 3 million yuan, number of employees not exceeding 300, and total assets not exceeding 50 million yuan. Water resource tax and securities transaction stamp tax are not within the scope of the halving in this announcement; those not meeting the corresponding entity or conditions do not apply for the corresponding incentives.

03 Policy changes

Compared with existing business processing, what changes are there?

This announcement clarifies that the policy of halving individual income tax on the portion of annual taxable income of individual industrial and commercial households not exceeding RMB 2 million shall apply from January 1, 2023 to December 31, 2027, and specifies that it can be enjoyed in combination with other current individual income tax preferences.

The "six taxes and two fees" halving policy for small-scale VAT taxpayers, small low-profit enterprises, and individual industrial and commercial households is implemented until December 31, 2027; the policy for small low-profit enterprises to calculate taxable income at 25% and pay enterprise income tax at a 20% rate is also extended until December 31, 2027.

The individual industrial and commercial household income tax preferential policies in Announcement No. 10 of 2022 and Announcement No. 6 of 2023 listed in the announcement ceased to be implemented accordingly from January 1, 2023. The materials do not provide the previous specific preferential standards or item-by-item transition differences. Other changes need to be judged in light of existing regulations.

04 Execution list

What preparations should enterprises complete?

1. Confirm separately by tax entity whether it qualifies as a small-scale VAT taxpayer, small low-profit enterprise, or individual industrial and commercial household, and correspondingly sort out the applicable taxes and fees.
2. Small low-profit enterprises should verify their industry, annual taxable income, number of employees, and total assets; the number of employees should include employees with labor relations and the number of dispatched workers accepted.
3. Calculate the number of employees and total assets according to "quarterly average = (beginning-of-quarter value + end-of-quarter value) ÷ 2" and "annual quarterly average = sum of all quarterly averages for the year ÷ 4"; for businesses that start or terminate operations mid-year, the actual operating period is treated as one tax year.
4. Individual businesses verify the annual taxable income, apply the 50% individual income tax reduction policy to the portion not exceeding 2 million yuan, and check whether there are other current individual income tax preferences that can be stacked.
5. Distinguish resource tax from water resource tax, and stamp tax from securities transaction stamp tax, item by item, to avoid including clearly excluded tax types in the halved scope.
6. Relevant taxes already collected before the announcement was issued may be offset against the taxpayer's tax payable in subsequent months or refunded; if deregistration was already completed before the announcement was issued, they shall no longer be enjoyed retroactively.

05 Risk Alert

What issues are most easily overlooked during implementation?

• Small low-profit enterprises must simultaneously meet the conditions for industry, annual taxable income, number of employees, and total assets, and cannot be judged solely by enterprise size or name.
• The determination of small low-profit enterprises is based on the annual corporate income tax settlement results.
• Newly established enterprises registered as VAT general taxpayers, engaged in industries not restricted or prohibited by the state, and meeting both conditions of no more than 300 employees and total assets of no more than RMB 50 million at the end of the month before the filing period, may declare and enjoy the "Six Taxes and Two Fees" preference as small and low-profit enterprises before their first annual settlement.
• The water resource tax and securities transaction stamp duty are explicitly not eligible for the halved policy in this announcement; incorrect tax type identification may lead to improper application of preferences.
• Taxpayers that had already deregistered before the announcement was issued may not enjoy retroactive treatment and cannot be handled under the rules for offsetting or refunding already collected taxes.

06 Official Interpretation

How does the State Taxation Administration explain this policy?

07 Original Policy Text

Announcement No. 12 of 2023 by the Ministry of Finance and State Taxation Administration