The State Taxation Administration of China (STA) explains which measures it has implemented for all taxpayers to manage the social and economic implications of the coronavirus.
Since the outbreak of COVID-19, the STA has implemented the decisions made by President Xi Jinping and the Chinese government, adopting a series of vigorous measures to contain the epidemic and boost economic and social development.
In particular, the STA has introduced tax incentives, ‘zero physical contact’ taxpayer services, big data analysis to allow work and production to resume, and all-round enhancements within office buildings to control the epidemic.
Targeted tax and fee incentives
To help control the spread of COVID-19 and enable businesses and individuals to resume work and production, the Chinese government has successively rolled out three batches of tax and fee incentives, each of which has a specific target and a distinct priority.
The first batch of policies provide immediate support to those containing the virus on the frontline. Such policies encompass 12 items in total, which fall under three categories:
- The first category directly supports medical treatment – subsidies and bonuses received by medical workers and related staff who participate in controlling the virus and administering treatment are exempt from individual income tax;
- The second category alleviates the burden for the production and transportation of necessary supplies for epidemic control. The measures include fully refunding newly increased excess input VAT for producers of important anti-epidemic materials, a one-off deduction in the calculation of enterprise income tax for equipment that is purchased to increase production capacity, and a VAT exemption for incomes derived from the transportation of essential supplies to control the epidemic; and
- The third category mobilises social support for epidemic control. Policies have been introduced to allow a full deduction of donations for epidemic control when calculating enterprise income tax and individual income tax. In addition, VAT exemptions have been introduced for voluntarily donated goods for epidemic control, as well as excise tax, urban maintenance and construction tax, education fee surcharge and local educational surcharge.
The second batch of policies is designed to relieve enterprises’ burden of social security contributions, reduce their labour cost and boost their confidence in resuming work and production.
These policies can be categorised into two groups:
- Group one offers a temporary reduction and exemption of the contributions made by enterprises for their employees' endowment insurance, unemployment insurance and employment injury insurance. Micro, small and medium-sized enterprises nationwide, as well as all types of enterprises in Hubei province, are exempt from these fees for a maximum of five months. Large enterprises in other areas of China are eligible for a 50% reduction for a maximum of three months.
- Group 2 allows a reduction in basic medical insurance contributions. The contributions made by the employers for their employees' basic medical insurance can be halved for a maximum of five months under the guidance of each province.
Supporting micro businesses and the self-employed
The third batch of policies focus on supporting micro and small enterprises and self-employed traders, aiming to strengthen their resilience to risks and stabilise employment.
The policies contain three items:
- From March 1 2020 to May 31 2020, small-scale taxpayers in Hubei province are exempt from VAT. In addition, the VAT rate outside of the Hubei province is cut from 3% to 1% for this group of taxpayers.
- Preferential policies for micro, small and medium-sized enterprises regarding the reduction and exemption of contributions on endowment insurance, unemployment insurance and employment injury insurance can be applied to self-employed traders as well; and
- Local governments are encouraged to support property owners' reduction or exemption of rent for self-employed traders via urban and township land use tax relief.
Timely implementation of tax and fee incentives
In order to make sure that tax and fee payers enjoy the preferential policies in a timely manner, the STA has taken four measures to ensure this happens:
The first is to ensure the incentives are publicised and guidance is available for taxpayers. Besides training tax officials, Chinese tax authorities have notified tax and fee payers of relevant policies via official websites, hotlines, Wechat and text messages, and responded to their questions through online interviews and video demonstrations. To date, 166 frequently asked questions and answers pertinent to hot policies have been published in seven sessions.
Secondly, operational guidelines had to be established. The STA created operational guidelines together with each policy issued. At present, operational guidelines have been made in relation to four categories of preferential policies to support epidemic control and medical treatment, the supply of resource materials, public welfare donations and to allow work and production to resume.
As a third step, the IT systems had to be reprogrammed. While actively cooperating with relevant departments in formulating policies, the STA made adequate preparations for IT system reprogramming to ensure smooth operation after new policies were introduced.
Finally, to effectively implement the preferential policies, the STA incorporated policy implementation into its performance evaluation system to consolidate responsibilities of tax authorities at all levels. In addition, this supervision has been strengthened and working disciplines have been emphasised to all tax officials.
Promoting ‘zero physical contact’ taxpayer services
Since the outbreak of COVID-19, Chinese tax authorities have deferred tax filings, enabled online processing and multi-channel Q&A sessions, as well as provided on-site services subject to a prior appointment to minimise crowding and ensure safety and convenience for taxpayers.
The STA has twice extended the deadline for tax filings. The tax filing deadline in February 2020 has been extended to the last working day of that month outside of the Hubei province and to the end of March 2020 in the Hubei province, and the tax filing deadline in March 2020 has been extended nationwide by one week.
The STA has also published a detailed list of 185 matters that can be processed online to encourage and guide tax and fee payers to deal with these matters through self-service systems and has encouraged local tax authorities to further expand the scope.
In addition, tax officials have answered personalised questions and satisfied the needs of tax and fee payers via platforms such as the 12366 Taxpayer Service Hotline and Wechat.
For the matters that do require presence in person, besides disinfecting the taxpayer service hall, tax officials are making appointments with tax and fee payers by avoiding peak times so taxpayers can prevent unnecessary physical contact with one another and enjoy safe and convenient services.
In late February, the STA launched the 2020 Spring Breeze Project nationwide by implementing 24 measures to improve taxpayer services. Among these were a series of measures to facilitate export tax refunds amid the epidemic control, which has provided export enterprises with more convenience when filing tax returns and accelerated the refund process. For instance
- ‘Zero physical contact’ filing and feedback can further serve export enterprises' applications;
- ‘Zero physical contact’ examinations, investigations and assessments, as well as permitting the temporary absence of on-site verifications subject to ex-post facto measures, can further speed up the review process; and
- Paperless filing for tax refunds, together with other convenient approaches, have raised the average speed of a tax refund by 20% compared to 2019.
These effective measures will significantly lighten the burden on enterprises and relieve the financial pressure, helping to stabilise foreign trade.
Chinese tax authorities have adopted the most stringent measures to control the epidemic and made an all-out effort to protect the health of their staff.
Moreover, in order to respond to President Xi Jinping's call, tax-related big data (particularly the data on VAT invoices) have been leveraged to support the work and production to resume and assist governments at all levels in making well-informed decisions.
With the gradual implementation of tax and fee incentives, the measures taken by the STA will play a bigger role in containing the epidemic, helping resume work and production for micro, small and medium-sized enterprises, and boosting economic and social development.
Recently, Pascal Saint-Amans, director of OECD’s Center for Tax Policy and Administration, said he highly appreciated the effective measures that the Chinese government has taken to contain the spread of coronavirus and the rapid implementation of tax and fee incentives by the STA to support the epidemic control and recommencement of work and production.