How to Benefit from Chinese Government Incentives for Foreign Small and Medium Enterprises?

Corporate Income Tax Incentives for Small and Low-Profit Enterprises

All types of small and low-profit enterprises in China can benefit from a reduced corporate income tax rate of 20% with reduced tax base:

• Annual Taxable Income: Portion less than 3 million yuan
  Tax Base: Income × 25%
  Tax Rate: 20%
  Effective Rate: 5%
  Effective Period: 2023.1.1 – 2027.12.31

Eligibility Criteria for Small and Low-Profit Enterprises:

• Annual taxable income does not exceed 3 million yuan (about $458,500 USD)
• Number of employees does not exceed 300
• Total asset value does not exceed 50 million yuan (about $7.7 million USD)

VAT Incentives for Small-Scale Taxpayers

• Monthly Sales Amount: Less than 100,000 yuan
  Quarterly Sales Amount: Less than 300,000 yuan
  VAT Incentives: VAT exemption (2023.1.1 – 2027.12.31)
  Additional Reductions: Education fee exemption

High and New Technology Enterprises (HNTEs)

The reduced tax rate for qualifying enterprises is 15%. Loss carryforward is also allowed for up to 10 years instead of 5 years for ordinary enterprises.

Qualification Criteria:

• Registered in China for at least one year
• Own intellectual property rights to core technology
• Operate in state-supported advanced technology fields
• Technical personnel ratio more than 10% of total employees
• R&D expenses constitute specified percentage of total revenue

Technology-Based Small and Medium Enterprises (TSMEs)

Enjoy the same 10-year loss carryforward benefits, plus super deductions for R&D expenses:

• 100% additional deduction for expenses that do not constitute intangible assets
• 200% amortization for expenses that constitute intangible assets