The corporate income tax rules in China have been updated for the 2019 tax year.
At the beginning of 2019, there were new corporate income tax requirements for companies—including multinational corporations—with operations in China. The new rules (first effective for the 2018 tax year) have been updated for the 2019 tax year.
Changes affecting corporate income tax can be summarized as reflecting the following:
Simplified filing procedures for R&D expenses eligible for “super deduction”
Announcement  No.41 stipulates that when declaring for entitlement to the “super deduction” available for R&D expenses, enterprises are not required to fill in the "Statement of Information of R&D Expenses Allowed for Weighted Deduction for R&D Projects" and submit the "Summary of Subsidiary Accounts for R&D Expenses" from 2019. Instead, enterprises are to retain the "Summary of Subsidiary Accounts for R&D Expenses" for future tax inspections—thereby streamlining the filing procedures.
Expanded scope for accelerated depreciation of fixed assets
Announcement  No.66 expands the scope of accelerated depreciation of fixed assets from specific key industries to the entire manufacturing sector. The definition and scope of “manufacturing sector” is to be in accordance with the Industrial Classification and Codes for National Economic Activities (GB/4754-2017).
Extended tax incentive period for integrated circuit design and software enterprises
Announcement  No. 68 extends the period for the tax incentive policy available for qualified integrated circuit design enterprises and software enterprises from 31 December 2017 to 31 December 2018. Specifically, qualified enterprises can enjoy an incentive period with effect from their profit-making year(s) prior to 31 December 2018, and be exempted from corporate income tax for the first two years, and pay corporate income tax based on 50% of the statutory tax rate (25%) for the following three years, until the incentive period expires.
Broadened conditions of small micro-profit enterprises entitled to preferential tax policy
Circular Cai Shui  No. 13 expands the scope of small micro-profit enterprises that are eligible for preferential tax policy. Small micro-profit enterprises engaged in non-restricted and non-prohibited businesses and that satisfy the following criteria are eligible:
For eligible small micro-profit enterprises, the applicable corporate income tax rate will be 20%. Meanwhile, the portion of annual taxable income amount, which does not exceed RMB 1 million, will be computed at a reduced rate of 25% as taxable income amount. The portion of annual taxable income exceeding RMB 1 million but less than RMB 3 million will be computed at a reduced rate of 50% as taxable income amount.
Increased pre-tax deduction limit of service charge and commission fee for assurance enterprises to 18%
Announcement  No.72 increases the deduction limit for service charge and commission fee incurred by insurance enterprises from 15% (property insurance) and 10% (life insurance) to 18% of the insurance premium. The term “insurance premium” means the balance of total insurance premium income less surrender payout for the current year. Also, the amount of service charge and commission fee exceeding the deduction limit can be carried forward and claimed as a deduction in future tax years, without limitation.
Preferential policy for Chinese depository receipts (CDRs) domestically issued by innovation-oriented enterprises
Announcement  No. 52 stipulates preferential tax policies involved in the issuance of CDRs by innovation-oriented enterprises in China at the pilot phase.
For more information, contact a KPMG tax professional:
David Ling | +1 (609) 874 4381 | Davidxling@kpmg.com
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