Henry Zhuang & Partners

22/01/2019

Income tax on small and low profit enterprises will be largely reduced

January 21, 2019
By Henry Zhuang & Partners
According to a notice jointly issued by Ministry of Finance and State Administration of Taxation on January 17, 2019, enterprise income tax, value-added tax and other taxes levied on the small and low profit enterprises (including foreign investment enterprises that are identified as small and low profit enterprises) will be significantly reduced. The full name of the notice is “Notice on implementation of preferential tax reduction and exemption policy for small and low profit enterprises (Cai Shui [2019] No. 13)”, and the Notice will be implemented from January 1, 2019.

According to the Notice, for the amount of annual taxable income of a small and low profit enterprise up to RMB1 million, only 25% of the said amount will be treated as the taxable income, and the enterprise income tax will be levied on such reduced taxable income at a reduced rate of 20%, therefore the actual income tax is only 5% on the actual taxable income. For the portion of the annual taxable income above RMB1 million up to RMB3 million, only 50% of such portion will be treated as the taxable income, and for such reduced taxable income the income tax will still be calculated at a reduced rate of 20%, as a result, the actual income tax is only 10% on such portion. For example, if the annual taxable income of an enterprise is RMB3 million, before the said Notice is implemented, the income tax would be calculated at the rate of 25% and RMB750,000 would be levied (3,000,000*25%=750,000), while after the Notice (that is applicable to the small and low profit enterprises) is implemented, only RMB250,000 will be levied as income tax (1,000,000*25%*20%+2,000,000*50%*20%=250,000), as such the income tax is reduced by RMB500,000 which can be regarded as substantial reduction for a small and low profit enterprise.

The Notice has adjusted the identification standard so that the number of identified small and low profit enterprises has been substantially increased. According to the Notice, a small and low profit enterprise refers to an enterprise that does not engage in any industry which is restricted or prohibited by the state, and complies with all the following standards: (i) its annual taxable income shall not exceed RMB3 million; (ii) the number of its employees shall not exceed 300; and (iii) its total assets shall not exceed RMB50 million.

According to the introduction given by the authorities that issued the Notice, this income tax reduction will benefit 17.98 million enterprises nationwide, accounting for more than 95% of the total number of enterprises that are paying taxes.

The Notice has also stipulated the relevant reduction and exemption of VAT and other taxes.

14/01/2019

New Regulations on Contracting of Rural Land
On December 29, 2018, the Standing Committee of the PRC National People's Congress issued a decision on revision of the Rural Land Contracting Law, which has been implemented from January 1, 2019. Compared with the old version of Rural Land Contracting Law promulgated in 2002, the newly revised Rural Land Contracting Law contains the following notable amendments:

1. The rural land contracting and operating right is clearly specified as including the land contracting right and land operating right. The contractor of the land may operate on his own, or transfer or interchange the land contracting and operating right within the farmers of the same collective economic organization; or keep the land contracting right and assign the land operating right to the others by leasing, subcontracting, making investment in kind, or any other ways, provided that such assigned land shall only be used for agricultural purpose.

2. The extension of the contract period of cultivated land, grassland and forest land has been clearly stipulated, i.e., the contract period of cultivated land shall be extended for another 30 years upon expiration of the original 30 year contract period, and the contract period of grassland shall be extended correspondingly upon expiration of the original 30 to 50 year contract period, similarly the contract period of forest land shall also be extended correspondingly upon expiration of the original 30 to 70 year contract period.

3. It is stipulated that if the assigned period of the land operating right is five years or more, the parties concerned may apply to registration authority for registration of the land operating right, and without registration, such assigned land operating right may not be protected against a bona fide third party.

4. It is stipulated that a contractor of the contracted land may use the land operating right as a security for his borrowing from a financial institute and file such security with the contractee. If the land operating right is assigned, the assignee is also entitled, upon obtaining written consent of the contractor and filing with the contractee, to use the land operating right as a security for his borrowing from a financial institute. For the above security, the parties concerned may apply to registration authority for registration, and without registration, such security may not be protected against a bona fide third party.

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12/11/2018

China will eliminate improper access restrictions imposed on foreign investment

PRC State Council General Office issued a circular on 29 October 2018 requiring improvement of business environment. In respect of foreign investment, the circular requires that before the end of March 2019, NDRC (National Development and Reform Commission) and MOC (Ministry of Commerce) shall eliminate all the foreign investment access restrictions existing in the areas that are not within the negative list of foreign investment access; and shall complete the revision of the Catalogue for Guidance of Foreign Investment Industries and the Catalogue for Guidance of Foreign Investment Priority Industries in Central and Western China, thus to expand the scope of encouraged categories of foreign investment.

08/11/2018

According to the Decisions newly promulgated by Standing Committee of PRC National People's Congress, for intellectual property cases involving invention patents, utility model patents, new plant varieties, layout designs of integrated circuit, technical secrets, computer software, monopoly, etc. which are of relatively strong professional nature, the PRC Supreme People's Court shall uniformly be the court of second instance for all appeals against the judgments of first instance. As stated by the Decisions, one of the purposes of the Decisions is to unify the trial standards for such IP cases.



The said Decisions shall be implemented as from 1 January 2019. Currently, the first instance of such IP cases should normally be trialed by one of 3 intellectual property courts situated respectively in Beijing, Shanghai and Guangzhou, or an intermediate people’s court, and accordingly if there is an appeal, the court of second instance should be the relevant high people’s court. However, after the implementation of the new Decisions, instead of the high people’s court, PRC Supreme People's Court will be the appellate court to handle such appeals.

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17/08/2018

最高人民法院于2018年8月1日发布了《关于依法妥善审理民间借贷案件的通知》，要求人民法院在审理民间借贷纠纷案件的过程中，要将正常的民间借贷行为，与设局提供“套路贷”侵占他人财产的犯罪行为区分开来；同时要求人民法院在民间借贷纠纷案件审理过程中，对于各种以“利息”“违约金”“服务费”“中介费”“保证金”“延期费”等突破或变相突破法定利率红线的，应当依法不予支持。

09/08/2018

Credit supervision on discredited parties has been strengthened

On 24 July 2018, General Office of PRC National Development and Reform Commission and General Office of People's Bank of China issued the Notice on Strengthening Credit Supervision on Discredited Parties, which includes 20 clauses and requires to build a credit punishment system.

According to Clause 8 of the Notice, the person in charge of the discredited unit (including its legal representative or its major person in charge), and relevant persons who are held responsible shall be held accountable, and their personal credit files shall include the discredit information of the discredited unit, and shall be published on the national credit information sharing platform. The said Clause 8 also requires to establish a joint punishment mechanism against the above mentioned persons.

According to Clause 11 of the Notice, in order to withdraw from the blacklist or the list of key concerns, in addition to the application to be submitted by the discredited party itself, a credit report issued by a qualified credit service agency shall also be submitted.

01/08/2018

Moveable Assets Mortgage Registration System Will Be Online Soon

Pursuant to a notice issued by General Office of State Administration for Market Regulation dated 25 July 2018, as from 31 August 2018, the moveable assets mortgage registration system will be online in eight provinces and cities including Beijing, Shanghai, Jiangsu province, Zhejiang province, etc..

According to the notice, parties to a moveable assets mortgage may submit materials online through the said system to carry out online the registration, alternation and deregistration of moveable assets mortgage. The registration office will only conduct formality examination of documents submitted, and will complete the registration if such formality examination is passed, and thereafter the moveable assets mortgage registration information will be disclosed online through the same system and the National Enterprise Credit Information Publicity System.

23/07/2018

According to the new plan for reform of tax collection and management system recently promulgated by the PRC authorities, as from 1 January 2019, all the social insurance premiums will be uniformly collected by the tax departments and will no longer be collected by the social security bureaus.

21/07/2018

Shanghai Banking Regulatory Bureau and Shanghai Real Estate Registration Office recently issued the "Notice on Launching New Bank Online Search System for Real Estate Registration Information". Through the new online search system, all banks in Shanghai may check online the real estate registration information, such as information of real estate owners, mortgage registrations, advance notice registrations, real estate freezing registrations, and may submit mortgage registration application documents online.

19/07/2018

The State Council has recently issued the “Interim Regulations on Human Resources Market” which will be implemented as from 1 October this year. The Regulations require that the public human resources service institutions established by the people's governments at or above county level shall not charge any fee for providing eight kinds of services (such as release of information regarding the supply and demand of human resources); it is also required that the for-profit human resources service institutions engaging in employment intermediary activities shall apply for the administrative license from the administrative department of human resources and social security in accordance with law, and obtain the human resources service license.

18/07/2018

According to the “Notice on Extension of Years for Carrying Forward Losses of High-Tech Enterprises and Medium and Small-Sized Technology-Oriented Enterprises” that was issued by PRC Ministry of Finance and State Administration of Taxation on 11 July 2018, as from 1 January 2018, for an enterprise that is qualified as a high-tech enterprise or a medium and small-sized technology-oriented enterprise, if the losses incurred in the past five years before it is qualified have not been fully made up, the balance may be carried forward, and the longest carry-forward period is extended from 5 years to 10 years.

16/07/2018

On 9 July 2018, “Notice of Implementation of Appropriate Restrictions on Specific Seriously Discredited Persons from Taking Trains and Civil Aircrafts within a Certain Period of Time” was issued jointly by General Office of PRC National Development and Reform Commission, General Office of the Supreme People's Court, Comprehensive Department of the Civil Aviation Administration and General Office of Railway Corporation.

This Notice was issued to implement the opinions on the same restrictions issued jointly by National Development and Reform Commission and other relevant organizations earlier this year, It is foreseeable that it will be more and more difficult for the discredited persons to live in Chinese society.