Small & Medium Enterprises Focus Group Quarterly Update - Q3 2014

Published on 2014-11-05

With China focusing on promoting growth and increasing inflow of cash, more tax breaks have been added for small businesses, starting on 1 October through the end of 2015, companies making less than 30,000 Yuan will be exempt from VAT and Business Tax.

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With China focusing on promoting growth and increasing inflow of cash, more tax breaks have been added for small businesses, starting on 1 October through the end of 2015, companies making less than 30,000 Yuan will be exempt from VAT and Business Tax. Additional overall support and tax relief is looked into for small and medium businesses.

Certain small businesses will pay flat 3% tax, effective on 1 July, mainly in the hydropower industry, water sector, building materials producers, biological products manufacturing, and certain commodities industries. The move is expected to reduce tax burden on the companies by around 24 billion Yuan.

China will now allow overseas investors to establish and own shipping enterprises. Such businesses can now be owned and controlled by foreign investors through the Shanghai PFTZ. Additional financial incentives and bureaucratic simplification will be offered to increase capacity, efficiency and transaction. Additionally, private businesses are now allowed into the telecommunications industry in efforts to reduce monopolization of industry. Guidelines and help will be offered to those in need of assistance.

Smaller businesses will now enjoy lower borrowing costs, as presented by the 10-measure guideline through the General Office of the State Council to help promote new loans flow.

In efforts to promote VAT, Beijing piloted the VAT reforms starting on 1 September. Eight additional regions are set to fallow suit before 2015- Tianjin, Jiangsu, Zhejiang, Anhui, Fujian, Hubei and Guangdong, as well as Xiamen and Shenzhen. VAT will be applied in place of the Business Tax in Jiangsu and Anhui provinces on 1 October, Fujian and Guangdong on 1 November, and Tianjin, Hubei, and Zhejiang provinces on 1 December.

Currency swap agreements between the Bank of England, and the European Central bank, and People’s Bank of China, have been set up to help build a stabilized trading market for the Chinese renminbi (RMB). UK is set to issue the first renminbi-denominated bond in October. There are now 5 key offshore RMB centers- Hong Kong, Taiwan, Singapore, Paris, and London to help with the RMB circulation and trade. China Construction Bank, London, has been appointed as the RMB clearing bank in London by the PBoC.

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