Small Size VAT Taxpayer Preferential Policy
On March 24, 2022, the MOF and the STA issued a new announcement on “Exempting small-scale VAT taxpayers from VAT” to provide additional support for the development of micro and small enterprises.
According to the announcement, small-scale taxpayers normally refer to taxpayers whose annual VAT taxable sales do not exceed RMB five million (approx. US $784,560), who are subject to a VAT levy rate of three percent and will be exempt from VAT payment or prepayment.
The taxable sales income that small-scale VAT taxpayers earned before March 31, 2022, will be taxed at a reduced rate of 1 percent instead of 3 percent.
Notes: The category of small-scale VAT taxpayers identifies taxpayers engaged in producing goods or providing labor services with an annual VAT taxable revenue not exceeding RMB 5 million. The standard VAT applicable to those taxpayers is 3 percent, levied on the amount of taxable revenue. A small-scale taxpayer is unlike the general VAT taxpayer, as the small-scale VAT taxpayers cannot claim input VAT as a credit against output VAT.
Due to the travel bans and social distancing measures implemented during the lockdown in Shanghai, businesses are exploring electronic signature methods to proceed with documentation requirements.
The Shanghai government has promoted e-signature during the epidemic and lock down periods.
Starting January 1, 2021, the PRC Civil Code took effect and endorsed the legitimacy of electronic contracts in China. Article 469 of the Civil Code states that electronic data exchanges or emails can be considered as a contract in written form: “Any electronic data that can show, in material form, the contents that it specifies through electronic data exchange or email and can be accessed for reference and used at any time shall be regarded as a written form.” (Article 469).
The Shanghai Electronic Certificate Authority Center Co., Ltd. (SHECA) is authorized by the Shanghai Municipal Government and is the first CA certified service institution providing identity authentication and digital signature related products and services.
Legal entities who register as users of SHECA are able to have their company seals verified and any legal documents that need to be stamped using “chops” can be uploaded to the SHECA center for e-stamping. The scanned copies with an e-stamp of documents would have the same legal effect (applicable to all Shanghai based clients).
Annual IIT Regularization Tax Return
Since the new IIT law ( which came into force on January 1, 2019) was introduced with new income categories and an annual reconciliation, we are now in the third year for individuals to complete their annual IIT reconciliation filing for 2021.
The best timing for completing this return is April 15th through April 30 and may be submitted via your mobile phone tax APP by logging in and completing the declaration form and submitting it. This period is a window whereby the tax authority may review the submitted return application quickly and would manage the IIT true up or refund sooner than at any other time .
Salary Treatment and Force Majeure during Lockdowns
Many enterprises are facing financial and operational difficulties due to the economic fallout resulting from the COVID-19 pandemic. This is especially true when the city is in lockdown and companies cease operations, with employees who are unable to go to work.
Generally speaking, the employer must still pay wages to the employee as they normally would during the first wage payment period (normally one month), regardless of whether the employee works or not.
When there is a suspension of operations that continues for more than one wage payment period, the employer has a right to adjust employees’ wages in line with the relevant local wage payment provisions, depending on whether the employee provides normal labor or not (Article 12 of the Interim Provisions on Wage Payments).
During the first month, it remains possible, after negotiation, to use the employee’s paid leave during the lockdown period. Starting from the second month, if the work cannot resume normally or be managed remotely, it is possible to temporarily reduce the salary to the minimum wage (so-called living expenses) depending on the degree of inactivity of the company and / or the employee.