- Entity formation
- Entity management
- M&A transaction support
- Private capital & hedge fund core services
- Private capital
- Hedge fund
- Technology solutions
- Other funds services
- SPV corporate services
- Agency services
- Loan administration
- Cross capital market services
- Structures implementation and management
- Private client services
- Reporting services
Explore content
Show all >Featured articles and media

Insights | Corporate Client Services
Voluntary carbon credits bolster green bonds
25 May 2023
Read >
Featured articles and media
Show all media for Private Capital & Hedge Fund Services >Featured articles and media
Show all media for Capital Markets >Featured articles and media
Show all media for Private Clients >Featured events

Events | Virtual
Bankruptcy and Restructuring: Navigating Distress in the Evolving Markets
22 Jun 2023
Learn more >
Events | Virtual
Private Funds Industry Live, Expanding Private Funds in Global Markets
10 Jan 2023
Watch the recording >
Events | Virtual
Private Funds Industry Live, Demystifying Private Capital Funds
6 Dec 2022
Watch the recording >- Home
- Our services
- Corporate Client Services
- Entity formation
- Entity management
- M&A transaction support
- Private Capital & Hedge Fund Services
- Private capital & hedge fund core services
- Private capital
- Hedge fund
- Technology solutions
- Other funds services
- Capital Markets
- SPV corporate services
- Agency services
- Loan administration
- Cross capital market services
- Private Clients
- Structures implementation and management
- Private client services
- Reporting services
- Corporate Client Services
- Our locations
- About us
- News & Insights
- Login
Small businesses in China get new VAT exemption
18 May 2022

Jack Yan
General Manager, Intertrust Group Shanghai

Jack Yan
General Manager, Intertrust Group Shanghai
China’s new VAT regulations are good news for SMEs, but add to the complexity of VAT administration and accounting
Small-scale taxpayers in China who were subject to 3% Value Added Tax (VAT) are now exempt from VAT altogether. Prepayment of VAT has also been suspended.
The new rules, which came into force at the beginning of April, continue the Chinese government’s long-standing policy of creating a friendly tax environment for small and micro-businesses.
Smaller businesses are hugely important to China’s economy thanks to the rapid growth of micro and small enterprises (MSEs) in past few years, which account for the majority of non-government employment
China is reckoned to have about 44 million micro and small enterprises (MSEs), a category that covers all businesses with annual incomes up to CNY3mn (USD460,000).
China’s VAT support for small business
While larger enterprises have rebounded strongly from the pandemic, many smaller businesses have struggled. So new tax measures to support the sector are well timed.
China’s VAT exemption will apply to businesses in all industries that are classified as small-scale taxpayers and subject to the 3% VAT rate.
In addition, the Ministry of Finance (MOF) and State Taxation Administration (STA) have announced a major boost to the tax reduction scheme.
This measure is also targeted at micro businesses and small firms in all sectors, as well as larger players in all industries.
China’s total VAT refunds will reach CNY1.5trn this year, according to the MOF.
What China’s VAT changes mean for your business
The new regulations are entirely straightforward. If you are an eligible small business now exempt from the 3% VAT rate, there will be no VAT to pay starting from the April 2022 tax period.
At the same time, normal accounting standards for small-scale taxpayers continue to apply.
For example, exempt businesses are required to issue ordinary tax-exemption invoices showing a zero VAT rate as necessary.
Taxpayers who choose to waive the tax exemption are required to issue special VAT invoices with a rate of 3%.
The VAT exemption is effective for new invoices issued from 1 April 2022. In case of sales discounts or refunds after this date, the 3% VAT rate will continue to apply since it refers to transactions made before 1 April.
The impact of the changes on standard monthly or quarterly reporting will have to be carefully calculated and administered.
All this can be time-consuming and confusing for small and medium-sized businesses facing cash flow pressures, while fighting to remain viable and profitable.
The new VAT measures are a valuable contribution to a tax-friendly small business environment. But they may require a significant amount of administration and oversight from the billing company.
How Intertrust Group can help with China’s VAT rules
Intertrust Group has the expertise to help businesses navigate the complexity of China’s VAT regulations.
- We can handle all recurring tax filing services for clients, taking the new regulations into account and updating tax calculations accordingly.
- We offer a complete VAT registration and administration service. China’s VAT is being streamlined, with further changes expected. We can keep on top of these changes for you, ensuring you are compliant and able to take full advantage of any benefits and exemptions.
- We can help you avoid falling foul of complex local rules without having to hire expensive in-house resources on the ground.
- Intertrust Group is a publicly listed company with 70 years’ experience in providing world-class trust and corporate services to clients around the world.