New Tax Incentives and Planning Tips for Companies and Individuals in China 2022


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Key Words

In the face of the new economic downward pressure, with the conclusion of the China Two Sessions in 2022, more tax incentives are implemented to meet the needs of market players. Favorable policies affecting the investment decisions of businesses and individuals have been adopted.   On April15, 2022, amid the global wave of interest rate hike, the Long-awaited "monetary easing" policy in China market finally landed. Compared with the tightening of 2021, policies of fiscal, credit and real estate will be loosened in 2022. Domestic demand is expected to rise, tax collection and management for high-income individuals will continue to be strengthened.   Under the new development pattern, companies and individuals should pay close attention to the corresponding tax policies to reduce cost and improve yield of the investments.


Corporate Income Tax (CIT) Planning

The specific new preferential policies on Large-scale tax reductions focus on manufacturing and service industries


  1. The income tax of small and micro companies is halved again. Companies with annual taxable income of less than RMB 1 million shall be levied at the effective taxrate of 2.5%; for annual taxable income of between 1-to-3-million-yuan, effective rate of 5% will be levied.   

2. From 2022 to 2024, small-scale VAT (value-added tax) taxpayers, small & microcompanies, and sole proprietors are entitled to reduction on “six taxes and two fees” (including resource tax, urban maintenance and construction tax, real estate tax, urban land use tax, stamp tax (excluding securities transactions), farm land occupation tax, education surcharge and local education surcharge) up to 50% of their tax rate.   

3. Cost on Electronic equipment newly purchased by SMEs in 2022 with a unit value of more than 5 million yuan and a minimum depreciation life of 3 years can be deducted before tax in the same year; 50% of the unit value of equipment with a minimum depreciation life of 4, 5 or 10 years can be deducted before tax in the year of purchasing   


Tax Incentives on New Purchase of Equipment Worth More Than 5 million yuan

4. Tax dues such as CIT, IIT,domestic VAT, consumption tax and the attached urban maintenance & construction tax, education surcharge, local education surcharge, etc. of SMEs in themanufacturing industry for taxable period from October 2021 to June 2022 can be postponed after filing tax returns in accordance with the law.
5. More supports in terms of tax reduction and partial social insurance premium deferral are provided to cultural and tourism industry, including catering, retail, tourism, and transportation businesses with special difficulties. In 2022, VAT on public transport services will be exempted, and advance payment of VAT will be suspended for branches of aviation and railway enterprises.   
6. The valid period of additional VAT deductions for manufacturing and consumer service industries will be extended by one year to December 31, 2022.   
7. In 2022the rental on state-owned real estates of small & micro companies and sole proprietors in the service sector will be reduced or exempted for sixmonths in high-risk areas and for three months in the restareas.   Property tax and urban land use tax will be reduced or exempted in accordance with regulations for the property owners who reduced rentals.   
8. The rate of additional tax deduction on R&D expenses for scientific and technology SMEs are increased from 75% to 100%   

9. The qualified third-party companies engaged in pollution prevention and control will receive preferential CIT at a reduced rate of 15% until December 31, 2023.

10. On March 24th, the Ministry of Finance and State Taxation Authorities jointly announced that all small-scale VAT taxpayers with applicable value-added tax rate of 3% in China would be exempt from VAT from April 1st, 2022, until December 31st, 2022. VAT prepayment would be suspended for projects with rate of 3%.


Please Click here to know more about“Annual Compliance and CIT Tax Planning for Foreign companies in China”


Individual Income Tax (IIT) Planning

2022 preferential tax policies that individual taxpayers should pay close attention to for tax planning


1. The expenses for caring of children under the age of three will be included into special additional deductions for IIT in light of Improving support to the three-child policy

2. Separate tax on Equity incentives for listed companies will be extended to December 31,2022   

3. Individual tax incentives for venture capital companies and angel investors will be extended to December 31, 2023   

4. The policy of annual lump sum bonus will not be incorporated into the monthly salary income but taxed separately on monthly basis will be extended to the end of 2023

5. Foreign IIT incentives are extended until December 31, 2023(Please Click here to know more aboutForeign Individuals Tax Optimization on China IIT

6. The implementation of GTS (Golden Tax system) Phase IV has incorporated social security into tax collection system, and the national pooling of basic endowment insurance for company employees was officially implemented in 2022.   The tax deductible individual commercial pension policy has been introduced, and the basic pension standardin China is expected to be appropriately raised   

Since 2021, news about entertainment celebrities and anchors being fined for tax evasion has send out important signal that tax collection and management for high-income individuals will continue to be intensified in 2022.   The overall monitoring of China tax system is strengthened by implementing GTS Phase IV, Tax planning hasbecome a big issue that businesses and individuals have to consider no matter for the purpose of tax reduction or risk prevention.

How should companies and individuals take advatages of tax incentives and record the deductions properly?   Our services cover:

1.   Compliance and planning in accordance with GTS and VAT regulations

2.   Structuring

3.   Investment and financing strategies   

4.   Incorporation of new entities

5. Financial and non-financial planning (insurance, trust, tax planning, retirement, and estate planning)   

6.   Year-end bonus tax optimization planning   

7.   Net assets and financial analysis report

Please feel free to contact us for customized planning and solutions.


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