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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.

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