China to cut 1.5t yuan worth of tax to stabilize economy
China will implement value-added tax (VAT) credit refund worth 1.5 trillion yuan ($235.56 billion) to provide strong underpinnings for keeping the operations of market entities stable and maintaining job security, the State Council's Executive Meeting chaired by Premier Li Keqiang decided on Monday.
The credit refund is a relief measure that can support businesses directly and efficiently. It is also a reform that helps cultivate sources of tax revenue and meaningfully refine the VAT system.
"Under the current circumstances, refunding excess input VAT credits to micro and small businesses and to manufacturing and other key industries is essential for ensuring stable growth at the moment. It is a direct boost to the cash flow of enterprises, and will benefit them more quickly than tax cuts," Li said.
The meeting decided to refund VAT credits to micro and small enterprises and self-employed households as general VAT payers across all sectors, which is worth around 1 trillion yuan.
Outstanding VAT credits will be refunded in one lump sum by the end of June. Refunds to micro enterprises will be completed in April, and those to small enterprises in May and June. Newly added credits will be fully refunded on a monthly basis starting from April 1.
In addition, tax refund requirement that "newly added credits should be above zero for six consecutive months and newly added credits for the last month should be no less than 500,000 yuan" will be called off on a time-limited basis.
Outstanding VAT credits of enterprises in manufacturing, research and technical services, electricity, heating, gas and water production and supply, software and information technology services, ecological protection and environmental governance, and transportation, storage, and postal services will be fully refunded, the meeting noted.
The refunding process will start on July 1 and be completed by the end of the year. Newly added credits will also be fully refunded on a monthly basis starting from April 1.
The meeting also noted the imperative to closely watch the impact of shifting international situations on the country's capital market. Continued efforts will be made to pursue development as the top priority, manage China's own affairs well, deepen reform and opening up and keep major economic indicators within the appropriate range. Well-calibrated measures will be taken to effectively keep the capital market stable and maintain steady and healthy development.