Summary Guide to Tax Incentive Policy Highlights

3 min.

As the new year begins, we have summarized the key tax policies from the past year to provide valuable insights for your business planning and decision-making. Below are the highlights:

Individual Income Tax (IIT) Policy

Annual Bonus

Regulation: Announcement of the Ministry of Finance and the State Taxation Administration [2023] No. 30
Details: Individuals can choose to calculate the annual bonus separately from their comprehensive income for tax purposes or combine it with their annual income.
Validity: Until December 31, 2027.

Foreign Individuals

Regulation: Announcement of the Ministry of Finance and the State Taxation Administration [2023] No. 29
Details: Foreign individuals who meet the conditions for being classified as resident individuals may opt to enjoy the special additional deductions for individual income tax, or they may choose to avail themselves of the tax exemption policies for housing allowances, language training fees, and children’s education fees. However, they cannot benefit from both sets of policies simultaneously. Furthermore, once a choice is made, it cannot be altered within the same tax year.
Validity: Until December 31, 2027.

Immediate Deduction for Qualifying Assets

Regulation: Announcement of the Ministry of Finance and the State Taxation Administration [2023] No. 37
Details: Enterprises can expense qualified assets (value ≤ RMB 5 million) purchased between January 1, 2024, and December 31, 2027, in the year of purchase instead of annual depreciation.
Benefit: Reduces taxable income, thereby lowering the tax burden and easing cash flow pressures.

VAT Exemption for Intra-Group Lending

Regulation: Announcement of the Ministry of Finance and the State Taxation Administration [2023] No. 68
Details: Lending of funds for free between organizations within a corporate group (including between such an organization and the corporate group) shall be exempt from value-added tax.
Validity: Until December 31, 2027.
Benefit: Reduces internal loan-related tax burdens and enhances financial flexibility.

Additional Deductions for R&D Expenses

Regulation: Announcement of the Ministry of Finance and the State Taxation Administration [2023] No.7
Details: Since January 1, 2023, for R&D expenses incurred by enterprises in R&D activities: that do not form intangible assets and are included in the current period’s income and expenses, in addition to the regular actual deduction, an additional 100% of the actual amount is allowed for pre – tax deduction; for those that form intangible assets, the cost of the intangible asset is allowed to be amortized at 200% before tax.
Exclusions: Industries such as tobacco; accommodation and catering; wholesale and retail; real estate; leasing and business service; entertainment etc…
Validity: Until December 31, 2027.
Benefit: Encourages innovation by reducing R&D costs. Especially for profitable enterprises, the higher R&D expense additional deduction ratio is directly reflected in the reduction of taxable payments, which significantly motivates enterprises to increase R&D investment.

VAT Super Deduction for Advanced Manufacturing Enterprises

Regulation: Announcement of the Ministry of Finance and the State Taxation Administration [2023] No. 43
Details: Advanced manufacturers can offset an additional 5% of deductible input VAT.
Validity: Until December 31, 2027.
Benefit: Promotes technological upgrades and innovation.

ECOVIS Ruide China: Your Tax Planning and Compliance Partner

We recommend businesses to:

Review operational activities to maximize tax benefits.
Consider tax impacts to optimize structures and mitigate risks.
Ensure compliance with the latest regulations.

And our experts are

Tax benefit eligibility assessments.
Tailored tax planning and risk identification.
Assurance of compliance with the latest tax rules.

Contact us to explore how these policies can benefit your business and maintain a competitive edge in China’s dynamic economic environment.