At an executive meeting of China’s State Council on 25 April 2018, Premier Li Keqiang announced that China’s general restriction of a 5 year carry-forward period to tax losses is extended to 10 years for high and new technology enterprises (HNTEs) and science and technology small and medium sized enterprises (SMEs) (see KPMG China Tax Weekly Update (Issue 17, May 2018) for details). This is now in effect.
On 11 July 2018, the Ministry of Finance (MOF) and State Administration of Taxation (SAT) jointly issued Cai Shui  No. 76 (“Circular 76”), clarifying that unused losses incurred in the previous 5 years by an enterprise, prior to it qualifying as a HNTE or a science and technology SME, are allowed to be carried forward for another 5 years. Circular 76 retroactively applies from 1 January 2018.
For more information about the policies for HNTEs and science and technology SMEs, please read the following KPMG publications:
As highlighted in KPMG China Tax Weekly Update (Issue 17, May 2018), at an 25 April 2018 executive meeting of the State Council, Premier Li Keqiang outlined several tax reduction measures.
One of the measures was that from 1 January 2018 to 31 December 2020, eligible small enterprises, whose taxable income falls under RMB 1 million, may qualify for a reduced 10% effective CIT rate. Under this incentive, 50% of their income is taxed at a corporate income tax rate of 20%. The threshold was previously RMB 500,000 (which was itself increased from RMB 300,000 under Cai Shui  No. 43 in 2017, see KPMG China Tax Weekly Update (Issue 23, June 2017) for details).
Following this, the MOF and SAT on 11 July 2018 jointly issued Cai Shui  No. 77 (“Circular 77") further clarifying the qualifying conditions:
These qualifying conditions are consistent with the existing rules.
In April 2018, Chinese President Xi Jinping indicated that China will (i) seek to expand imports; (ii) significantly reduce import tariffs for imported automobiles and consumer goods (see KPMG China Tax Weekly Update (Issue 15, April 2018) for details). To put these commitments into effect, the SAT and MOF had issued Shui Wei Hui  No. 3 and No. 4 in tandem in May 2018. Effective from 1 July 2018, import tariff rates on automobiles, auto parts and certain daily consumer goods (such as foodstuffs, cosmetics, garments) will be reduced (see KPMG China Tax Weekly Update (Issue 21, May 2018) and (Issue 22, May 2018) for details).
Going still further, on 9 July 2018 China’s State Council approved guidance to foster foreign trade under Guo Ban Fa  No. 53. The guidance was jointly developed by 20 governmental authorities including the Ministry of Commerce (MOFCOM), MOF, SAT, etc.
The guidance sets out a number of general objectives, though specific rules are yet to be developed by the relevant governmental authorities. As such the precise actions that will be taken remain to be seen. Guidance objectives include:
We will provide further updates on subsequent developments.
On 19 June 2018, the Standing Committee of China’s National People’s Congress (NPC) reviewed the third version of the draft E-commerce Law (“third draft bill”). The draft bill has been published on NPC’s website to solicit public comments by 28 July 2018.
Prior to this, the first and second draft e-commerce bills were submitted to the NPC for review in December 2016 and October 2017, respectively. See KPMG China Tax Weekly Update (Issue 49, December 2016) for details of the first draft bill. The key highlights of the second draft bill included:
The third draft bill, taking into consideration the public comments on the second draft, makes the following key changes: