Doing Business in China: Tax burden drops for small and micro businesses

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02:20

Tax cuts are usually music to the ears of taxpayers. And across China, millions are already seeing the difference in their monthly salaries. With Chinese Premier Li Keqiang announcing more measures on the way, tax cuts may soon translate to even more money in citizens' pockets. CGTN's Yang Chengxi shows us who will reap the rewards.

Turning words into actions, Chinese Premier Li Keqiang's tax cut speech Tuesday coincided with several of the government's policies as such. Two months into 2019, more than 30 provinces, municipalities and autonomous regions have announced tax cuts for small and micro companies, firms that have less than 300 employees, 3 million yuan of annual revenue and 50 million yuan worth of assets.

GANG JIONGYI, PRESIDENT MED&CO "The government's decision to lower our taxes shows that it is supporting the development of my industry."

Under the new rule, a company's annual taxable revenue is split into two segments, with tax rates of 5 and 10 percent respectively. If a taxpayer's monthly income is less than 100 thousand yuan, he or she will be exempt from paying any value-added taxes.

GANG JIONGYI, PRESIDENT MED&CO "We used to pay 200 thousand yuan worth of taxes a year, which made our lives very difficult. But since 2019, our taxes are dropped to about 20 thousand yuan."

YANG CHENGXI SHANGHAI "It is estimated that the tax reduction can save China's small and micro business sector about 200 billion yuan, or close to 30 billion US dollars a year."

A whole range of other fees and taxes are also down by as much as half. Officials say this policy should cover over 95 percent of companies in China, including non-mainland invested ones. Clair Pan is from Hong Kong and operates a wine start-up.

CLAIR PAN HONG KONG ENTREPRENEUR "When you just started your business, it is very hard for your cash flow. You're always trying to maintain very good cash flow. In the beginning of this year, we got this tax relief policy. Actually it's quite exciting news for international investors, just to see this opportunity."

Tax cuts fall in line with the Chinese government's strategy to provide initiatives to private sector companies, and boost long term economic growth. YCX, CGTN, SHANGHAI.