Skip links

China withdraws 3% VAT rate for small businesses till 31 Dec 2022

Temporary exemption from VAT for small businesses as economy struggles to hit growth targets

On 24 March 2022, China’s Finance Ministry announced the withdrawal of the 3% VAT rate applied on small businesses.  This includes enterprises with annual sales not exceeding CNY 5 million per annum.

This will apply from 1 April until 31 December 2022.

Earlier this week, China VAT credit refunds were announced as being speeded up with a CNY 1.5 trillion (approx $236 billion; €215 billion).

China growth hits 30-year low

This tax support is being rolled out following worries around COVID-19 outbreaks and the slowing economy. Earlier this month, China set it’s 2022 growth target at 5.5%, the lowest since 1991. The effects of the ongoing COVID-19 shutdowns and property price collapse have been the main causes.

China’s tax as a share of GDP at 21% remains one of the lowest in major countries. The OECD average is 34%. China had already cut the main standard VAT rate from 17% to 13% in 2017.

Get our global VAT and GST free news emails, sign-up here.

VAT Calc helps all businesses because it's built on tax laws

National tax laws, EU VAT Directive or global OECD guidance built-in
All Rates; standard, reduced, zero and exempt
Tax Point - Determination of when the VAT becomes chargeable
Deductibility - Calculation of how much input VAT can be deducted on taxable purchases
VAT groups
B2B Goods Full cross-border determination on movement of goods, including imports, exports and intra-community acquisitions and dispatches
Goods imported into, intended for or supplied whilst in customs procedures or VAT warehousing arrangements
Reverse charges for non-established persons and for risky goods and services
EU Triangulation
Call-off and consignment
Supply of goods with installation
Movement of own goods
Brexit complexity for transactions between NI and the EU and NI and GB
B2C Goods Low value goods thresholds
VAT registration thresholds
EU OSS and IOSS returns
EU and others’ marketplace deemed supplier treatment
EU and non-EU distance selling rules 
Services General rules for B2B and B2C 
Supplies connected with immovable property
Supplies by intermediaries
Use and enjoyment
All other exceptions to general rules
Digital Services EU OSS for digital services
Local country simplified VAT returns
Financial Services Partial exemption rules

Leave a comment