27 Apr 2021 Legal News: Liquidation: China to Amend Simplified Deregistration of Enterprises
Liquidation: China to Amend Simplified Deregistration of Enterprises
On April 16, 2021, State Administration for Market Regulation (“SAMR”) issued an opinion for public comments to improve the process for closing the business in China (“Draft Opinion”)1 and compared to the previous rules issued in 2016 (“2016 Opinion”)2, we summarize the following two major changes.
1. Broadening scope of enterprises qualified for simplified deregistration
The change focuses on what kinds of enterprises are entitled to go through the simplified deregistration process, detailed as follows:
2. Shortening announcement period of simplified deregistration
An enterprise shall first make a public announcement via SAMR online system for a period of 45 days. Only after the “45-day announcement period” expires (as well as no creditors claim any creditor’s rights), the enterprise can file the simplified deregistration process at SAMR.
Currently, the Draft Opinion amends the “45-day announcement period” into “20-day announcement period3”.
Tax: New Preferential CIT Policy for Small and Micro Enterprises
To support small and micro enterprises (“SMEs”) during the Covid-19 pandemic, Chinese Premier Li Keqiang stated in the Government Work Report on March 5, 2021 that PRC government will further issue tax relief measures on SMEs.
Further official steps were recently taken to respond the Government Work Report. In April 2021, the Ministry of Finance and the State Tax Authorities jointly issued a CIT preferential policy on SMEs4 (the “Policy”) and the main points of the Policy are as follows:
• Who is entitled to enjoy the Policy?
(1) Engaging in industries that are not prohibited or restricted
(2) Annual taxable income ≤ RMB 3 million yuan
(3) Number of employees ≤300
(4) Total assets ≤ RMB 50 million yuan
• What are the changes in the Policy compared to the previous CIT preferential policy?
The change focus on the annual taxable income of the SMEs that are less than RMB 1 million yuan, specifically:
According to previous CIT preferential policy, for taxable income not exceeding RMB 1 million yuan, a 20% CIT rate on 25% of the total taxable income shall apply, which means the actual rate is 5% (20%×25%)
Under current Policy, for taxable income not exceeding RMB 1 million yuan, a 20% CIT rate on 12.5% of the total taxable income shall apply, which means the actual rate is 2.5% (20%×12.5%)
• When to apply the Policy?
From January 1, 2021 to December 31, 2022
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1. The Chinese name of the Draft Opinion: 关于进一步完善简易注销登记便捷中小微企业市场推出的通知. The Draft Opinion solicits public comments by May 16, 2021
2. The Chinese name of the 2016 Opinion: 工商总局关于全面推进企业简易注销登记改革的指导意见
3. In 2018, China already allowed certain pilot cities/areas to apply the 20 day announcement period in advance, which are Beijing, Tianjin, Hangzhou, Ningbo, Wuhu, Bengbu, Quanzhou, Ganzhou, Jiujiang, Jinan, Rizhao, Hubei Pilot Free Trade Zone (Yichang Area), Wuhan East Lake High-tech development zone, Yueyang, Guangzhou (Nansha), Shenzhen, Zhuhai, Dongguan, Fangchenggang, Hainan province, Chengdu, Sichuan Pilot Free Trade Zone (South Sichuan Port Area), Chongqing (Dazu and Shapingba), Guiyang, Xianyang.
4. The Chinese name of the policy: 关于实施小微企业和个体工商户所得税优惠政策的公告 财政部 税务总局公告2021年第12号
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