原标题：Tax 2021#5
Authors | Johnson Zhuang, Partner
Joy Zhang, Senior Associate
Circular on Adjusting the Taxable Income Rate of Individual Income Tax of Sole Proprietorships and Partnership.
Topic
Tax Law
Type
Normative Document
Authority
State Taxation Administration Beijing Municipal Tax Bureau; Beijing Municipal Finance Bureau
Promulgation Date
December 31, 2020
Effective Date
January 1, 2021
In response to the call of [1] from both the Party’s Central Committee and the State Council, the State Taxation Administration (“STA”) Beijing Municipal Tax Bureau and the Beijing Municipal Finance Bureau recently issued the Circular on Adjusting the Taxable Income Rate in relation to Individual Income Tax applying to Sole Proprietorships and Partnership Enterprises (the “Circular”) in certain industries.
The Circular has come into force since January 1st 2021. Although it is a local-level tax circular applying in Being, the Circular would suggest the current tendency nationwide to mitigate the tax burden on small businesses with a purpose to enhance the economic recovery from the pandemic.
Within the Chinese income tax regime, a greater part of sole proprietorship enterprises and partnership enterprises are permitted to pay individual income tax based on the computed income that is figured out by multiplying the sum of both cost and expenses (or the sum of sales revenues) by a presumed rate of taxable income. In this scenario, the taxable income shall be determined by the computation approach rather than the accounting approach, which will depend largely on the level of the presumed taxable income rate that applies to individual enterprises.
The local tax authorities will presume and assign a specific rate of taxable income to a qualified enterprise within the STA prescribed-range of the taxable income rates. The Circular above announces to apply a taxable income rate of 5% (which is at the lowest end of the STA prescribed-range) instead of 7% to all Beijing-based sole proprietorship or partnership enterprises that are engaged in manufacturing, transportation, or commerce sector provided that they are permitted to determine the taxable income by the computation approach.
We’ve kept following up closely on the tax-mitigating campaign being launched by the tax authorities nationwide.
If you are interested in seeking information and advice with regard thereto, please do not hesitate to contact us.
References
[1] The “Six Stabilities” are referring to stabilize the employment, finance, foreign trade, foreign investment, investment and expectation work, while the “Six Securities” are referring to secure the employment of residents, the people’s basic livelihood, market entities, food and energy, the stability of industry and supply chains, as well as the grass-roots operations.
Source
http://czj.beijing.gov.cn/zwxx/tztg/202012/t20201231_2191165.html
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