Threshold for 50 percent reduction to be set at 200,000 yuan, showing government's 'support'

China will make more small and micro businesses eligible for tax breaks in an effort to encourage innovation and boost employment at a time of downward economic pressure, officials at the State Council's executive meeting decided on Wednesday.

Small and micro businesses with annual taxable incomes below 200,000 yuan ($31,980) will be eligible for a 50 percent reduction of their business income tax, according to a statement released after the meeting, which was presided over by Premier Li Keqiang.

The measure will be effective from Jan 1 of this year to the end of 2017. During the same period, these companies could also pay the tax at a rate of 20 percent, five points lower than other enterprises, it said.

Eligibility for the 50-percent reduction has been expanded several times since 2012. The original threshold was a business income below 30,000 yuan, but that was amended to the current 100,000 yuan. The new threshold will be 200,000 yuan. According to the State Administration of Taxation, tax breaks for small and micro businesses in China totaled 61.2 billion yuan last year. Business income taxes of 10.1 billion yuan were reduced or scrapped for 2.46 million small and micro businesses.

Wang Yuanzhi, deputy secretary-general of the China Association of Small and Medium Enterprises, said the decision will help companies by relieving their tax burden further. "It shows the government's increasing support for these companies," Wang said, adding that the reduction of taxes and fees is a necessary measure to ensure stable development of small, low-profit companies.

Small and micro businesses are a key driving force of innovation and employment, Wang said. As their products and services are closely related to people's livelihoods, they play a crucial role in maintaining China's steady economic growth.

Officials at the meeting also lowered the rate for unemployment insurance fees from the current 3 percent to 2 percent, a measure that is projected to save more than 40 billion yuan for enterprises and employees.

mojingxi@chinadaily.com.cn

(China Daily USA 02/26/2015 page3)