ANNOUNCEMENT 05 Sep 2018
September 5th, 2018 - The Chinese government announced a discriminatory preferential tax policy for certain Chinese firms.
NUMBER OF INTERVENTIONS
PRC State Administration of Taxation, September 5th, 2018. (财税〔2018〕91号 关于金融机构小微企业贷款利息收入免征增值税政策的通知)
PRC Ministry of Industry and Information Technology, June 18th, 2011. (工信部联企业〔2011〕300号 关于印发中小企业划型标准规定的通知)
On September 5th, 2018, the Chinese government released Caishui 2018/91: a new policy whereby income acquired from interest on loans to 'small- and micro-enterprises' would not be liable for VAT. This is applicable for loans with interest rates up to 150% of the benchmark People's Bank of China interest rate of the same period. Any income gained over this interest rate will be subject to VAT as per the usual policy.
This incentivises Chinese financiers to provide more loans to such firms.
The definition of such an enterprise was last formalised in a Ministry of Industry and Information Technology announcement from 2011 (Gongxinbu Lianye 2011/300). The criteria are different depending on which sector the firm is in, but the firm must be a native Chinese company to receive such a classification.
Please not that the September 2018 announcement applies to 'small- and micro-enterprises', not SMEs (small- and medium-enterprises). Please see the 2011 announcement for details on the definitions of this.
The policy is billed to last until the end of 2020.