After a two-month lockdown due to COVID-19, Shanghai reopened on June 1, 2022. To support businesses recovering from the lockdown, the Shanghai government released an action plan to accelerate the recovery and revitalization of the economy, including policies related to tax payment deferral, tax refund and reduction, fiscal subsidies, small enterprise loans, and other measures, effective June 1.
Deferral of tax and social contribution payment and annual report filing
VAT credit refund
The value-added tax (VAT) in China, levied on the added value of taxable goods and services, varies from 6 to 13% for general taxpayers.
VAT credit accrues when overpaid input VAT exceeds output VAT at the end of the tax period. Previously, under many common circumstances, VAT credit wasn’t refundable but could be carried forward to be deducted in the following tax period. However, since 2019, companies in certain manufacturing sectors have been allowed to apply for a return of VAT credit.
Now the Shanghai government’s action plan has further expanded the scope of companies eligible for VAT refund to small enterprises from all industries, as well as enterprises of all sizes in six industries. These include manufacturing, R&D, and logistics, etc. Qualified enterprises can enjoy:
- One-time refund of the remaining VAT credit by June 30, 2022.
- Full refund of incremental VAT credit on a monthly basis, starting from April 1, 2022.
Property tax and urban land use tax reduction or exemption
Taxpayers affected by the COVID-19 pandemic and having difficulty paying property tax and urban land use taxes for self-used properties can apply to local authorities for reduction or exemption for the second and third quarter 2022 tax payment period.
Other tax incentives
Other tax incentives related to VAT and CIT released in March of this year are still effective. More details can be found in our article, International tax news and other global updates for Q2 2022.
Rent reduction and subsidies
Micro and small-sized enterprises (MSEs) that rent state-owned property are exempted from rent payments for a period of up to six months, without proof of pandemic impact.
For nonstate-owned properties, property owners are encouraged by the government to reduce the rent for MSEs that lease their property. Eligible property owners that reduce rent for MSEs can receive a subsidy of 30% of the total rent reduced, capped at RMB 3 million (about 450,000 USD).
Subsidies for business operations
Utilities
Businesses are eligible for subsidies up to 10% on their use of utilities such as water (including sewage treatment), electricity, natural gas, broadband internet, and landline services for three months.
In addition, businesses will be exempted from the over-quota and progressive water charges in 2022.
Professional training
Companies providing external online training related to the business to their employees can receive a subsidy of RMB 600 (about 90 USD) for each employee receiving the training, up to three times in 2022.
Employee recruitment
Companies are eligible for a one-time subsidy of RMB 2,000 (about 300 USD) for each employee they hire who has been unemployed for more than three months or who is a 2022 graduate from a university in Shanghai. Companies must sign a labor contract with the employee for at least one year and pay social contribution taxes as required by law.
Companies hiring recent graduates from universities in Shanghai are eligible for tax reductions of RMB 7,800 (about 1,165 USD) per year for three years for each graduate they hire.
Financial support for MSEs
The government encourages financial institutions to provide loans to MSEs and to extend the period for overdue interest and principal payments to the end of 2022.
Support for foreign investment and trade businesses
The action plan specifically mentions measures to support foreign investment and trade business in Shanghai.
The Shanghai government is organizing various events to engage with foreign-invested enterprises, listen to their challenges, and help them resolve the issues. The government also is assigning specialized personnel from various departments to help key enterprises during their work resumption process.
In addition, the government will assist with entry and exit procedures for foreign employees and their family members of the foreign-invested companies, global executives and professional personnel traveling to Shanghai, as well as important overseas customers of foreign trade enterprises.
The above policies and measures are generally effective from June 1 to Dec. 31, 2022, but certain measures may have different implementation periods and deadlines, so please make sure to check out the policy details and specific deadlines.
For specific inquiries about the policies in Shanghai as well as other cities in China, please contact Alex He or Brian Wang in our China office.
