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China small businesses VAT cut for 2023

Struggling economy given tax boost as 3% VAT on small businesses temporarily withdrawn for 2023 and replaced with 1% rate

On 9 January 2023, the Chinese Ministry of Finance  provided fiscal relief for small businesses by reducing the Value Added Tax rate applicable to small businesses from 3% to 0%. In China, the threshold for small business classification is sales of Yuan 100,000 (approximately US$ 15,000) per month.

In addition, non-real estate small business whose annual sales of goods and labour services but have exceed the above threshold are exempt, too.

The State Taxation Administration also stated that small-scale taxpayers liable to the 3% rate will only be now liable to a reduced rate of 1% for 2023. This includes advance VAT payments.

Secondly, there is an additional 5% VAT credit on input tax for taxpayers in the following ‘productive’ sectors: consumer services; telecoms; education; postage; and others.

In 2022, China launched an accelerated VAT credit release scheme to help a range of businesses as the country struggled following COVID and a global economic slowdown. This amounted to Yuan 4 trillion.

China has three standard VAT rates: 13%; 9%; and 6%. You can verify global VAT rates on our searchable database.

Facing similar difficult economic and inflationary issues, European VAT cuts have also been introduced.



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