A pneumonia epidemic—referred to as a novel coronavirus—has spread rapidly across China since the beginning of 2020. At present, the epidemic has spread to 31 provinces (including autonomous regions and municipalities) as well as to Hong Kong SAR and Macao SAR.
The coronavirus is viewed as having a greater impact than the SARS epidemic back in 2003, in that a greater number of cities and industries have been affected by the coronavirus epidemic. Affected industries especially include service sectors—such as hotel catering, tourism, education and training. In view of the situation, the Chinese government extended the Chinese New Year holidays with a view to containing the outbreak. While this has inevitably resulted in disruption to normal enterprise operations, many are actively donating money and goods to support front-line medical workers. In parallel, enterprises engaged in special fields, such as logistics, agriculture, genetics, and bio-pharmaceuticals, are persisting in their efforts to address the outbreak.
China’s tax and finance authorities have reacted to the epidemic. On 1 February 2020, the Ministry of Finance (MOF), General Administration of Customs (GAC) and State Taxation Administration (STA) jointly issued Announcement 6, and STA on 30 January 2020 issued Circular 19. These guidance items set out preferential measures to support enterprises and citizens to fight against the outbreak.
Announcement 6 clarifies that imported supplies, donated by domestic and foreign donors and used for prevention and control of the epidemic, can be exempted from import duties, import value added tax (VAT), and import consumption tax. This relief is valid from 1 January to 31 March 2020.
Certain provisions of Announcement 6 include:
In addition, the preferential treatment also applies to supplies imported by the health administration for the outbreak, even though the supplies are not donated. Tax refunds can be obtained for qualified supplies for which taxes have already been paid.
Circular 19 extends the February 2020 statutory tax filing deadline to 24 February 2020. This can be further extended by local tax authorities where the outbreak is identified as serious (such as in Hubei province). Affected taxpayers and withholding agents can apply for further extension. Circular 19 also encourages local tax authorities and taxpayers to deal with tax matters online or via mobile application.
In Circular 29, issued on 1 February 2020, government authorities including the People’s Bank of China (PBOC), MOF, China Banking Insurance and Regulatory Commission (CBIRC), China Securities Regulatory Commission (CSRC), and State Administration of Foreign Exchange (SAFE) jointly set out 30 financial measures to support the prevention and control of the coronavirus outbreak. This covers credit and financial support, security of financial infrastructure, foreign exchange, and cross-border RMB business.
Prior to this, MOF and the National Health Commission (NHC) on 25 January 2020 also issued a circular clarifying that the government will provide subsidies for treatment expenses, medical and epidemic prevention workers, medical institution expenditure on purchased special equipment, and rapid diagnostic reagents for prevention of the outbreak.
The introduction of Announcement 6 and Circular 19 illustrates how China’s tax and finance authorities intend to deal with this public health emergency. Looking back at the financial and tax circulars issued at the time of the SARS epidemic, more tax relief measures for the coronavirus outbreak may be expected in due course.
Considerations for enterprises from a tax perspective include:
The crucial role of biotech enterprises, producers of protective apparatus, and medical and scientific professionals in combatting the outbreak is well recognized. Tax professionals expect future tax and financial policies to provide additional support, and set out policy suggestions below.
Disaster relief measures
Industry support policies
More tax relief may be expected by affected enterprises to help them endure the current difficulties and help them with recovery once the outbreak is under control.
For more information, contact a KPMG tax professional:
David Ling | +1 609 874 4381 | firstname.lastname@example.org
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.