China

• On 13 March: the Chinese central bank, which unblocked extensions or renewals of loans to companies at the end of February, announced a reduction in the banks' mandatory reserve ratio, freeing up 550 billion Yuan (70.6 billion euros) to support the economy. The People's Daily announced on its front page "the reopening of 79% of major construction sites" in China.
• On 12 March: NDRC published a circular encouraging the resumption of activities by foreign companies. The circular asks the relevant local authorities to make regular visits to foreign companies and monitor their projects in order to assess their situation (activities, production, investments).
• On 19 March: the government announced a package to support the digitalization of SMEs in the context of the crisis.
  

In addition, a wide range of policy measures have been announced for SMEs at the regional level in China. These include deferred tax payments for SMEs, reducing rent, waiving of administrative fees, subsidizing R&D costs for SMEs, social insurance subsidies, subsidies for training and purchasing teleworking services, and lowering lending rates. Furthermore, banks are being granted extra funding to spur SME loans.

Click here to see a comprehensive summary of jurisdictional tax measures and government reliefs in response to COVID-19.

Labor Policy

• The finance ministry cut social insurance payments by RMB 1 trillion to incentivize companies to retain employees. In late January the ministry announced that workers‘ compensation would be subsidized for infected medical workers, and local finance departments rolled out daily stipends for them.
• Deferring the payment of social security contributions (and in some cases refunding contributions already made)

Trade restrictions

• In China’s major cities (Beijing / Shanghai / Guangdong), companies that are found to be in temporary difficulties owing to the coronavirus outbreak and do not lay off employees or minimize the layoffs can get a refund of unemployment insurance premiums.
• In Guangdong province, China’s manufacturing heartland, over 6.08 million migrant workers had returned to work, which represents around a third of the overall migrant worker population in the province.

The People's Bank Of China, 3rd of February, 2020

• Launched 1.2 trillion Yuan of the public market reverse repurchase operation on February 3rd: Maintain the liquidity of the banking system in the special period of epidemic prevention and control, meet the reasonable financing needs of the market, reduce the reverse repurchase rate by 10 basis points, and provide targeted low-cost special re-loan fund.

The People's Bank Of China 10th of February, 2020

• Issuing the first batch of the special re-loans: Support them to provide preferential loans to the enterprises under the list management system, which are the key protection enterprises for epidemic prevention and control. For enterprises that enjoy special re-loan support from the PBOC, the Ministry of Finance will provide fiscal interest discounts support.

The People's Bank Of China, 17th of February, 2020

• Carry out medium-term lending facility (MLF) of RMB 200 billion and 7-days reverse repos of RMB 100 billion, and the interest rate of this MLF is 10 BP lower than the previous: In order to hedge the impact of factors such as the maturity of PBOC‘s reverse repos and maintain a reasonable and sufficient liquidity of the banking system

The state council executive meeting, 18th of February, 2020

• Phased reduction and exemption of corporate social insurance fees and implementing the policy of payment delaying of housing fund by enterprises: "In order to reduce the impact of the epidemic on enterprises, especially small and medium-sized enterprises, in all provinces except Hubei province from February to June, small and medium-sized enterprises can be exempted from endowment insurance, unemployment insurance and industrial injury insurance, and from February to April, large enterprises can be reduced by half; Hubei Province can be exempted from February to June for all kinds of insured enterprises. At the same time, before the end of June, the enterprise can apply for delaying the payment of housing provident fund. During this period no overdue treatment will be made for the provident fund loans that the employees fail to repay normally due to the impact of the epidemic.“

The People's Bank Of China(PBOC) 20th of February, 2020

• LPR interest rate reduction operation: The LPR of one-year period was 4.05%, 10 bp lower than that of last month; the LPR of more than five-year period was 4.75%, 5bp lower than that of last month. 

Cuts on required reserve ratio

• Cuts on required reserve ratio (one in March and one in April), each injecting RMB550bn and RMB400bn liquidity respectively into the market. in addition, PBoC, the central bank, cut the MLF rate by 20bp, suggesting a forthcoming cut on the LPR rate (will be released on 20 April).

Export of medical supplies

• Based on 2020 Announcement No.5, effective April 1, companies are required to submit declarations to China Customs stating their products “meet the relevant standards of the countries where goods are to be imported” and Registration Certification of Medical Device (“CMD”) approved by National Medical Products Administration in China. 
• Certified medical products in China are listed on the NMPA website: (www.nmpa.gov.cn/WS04/CL2582/)
• Hence, medical products that are not on this list will not be approved for exportation. 
• In addition, these medical equipment are required to go through formal inspection and quarantine process by Customs which creates further delays

Customs clearance

• Set up ‘green’ channels for quickly checking of donated goods;
• Emergency and charitable donations shall be registered and released first, tax reduction and exemption related procedures shall be made up later;
• The Customs shall examine the goods, and the consignee or consignor may entrust an agent to assist on the spot 
• Simplified inspection process of medicals and epidemic prevention goods imported

Duty relief

• Moderately expand the scope of duty-free import of charitable donated goods, and the imported goods donated for Covid-19 prevention shall be exempt from import duties, VAT and consumption tax;
• For the duty-free imported goods that meet the requirements and have been taxed, the payments shall be returned;
• The qualified duty-free goods originating in the US shall not be subject to the imposition of additional duties on the US and the tax payments shall be returned.

Deferred tax payments

• Where the time limit for payment expires within the date of resumption of work, the tax shall be paid within 15 days after the work resumption date, and no overdue fines shall be charged；
• For the overdue payment of imported goods, the levy date shall be postponed to the work resumption date.

Processing trade and others

• For overdue business of processing trade enterprises, the Customs shall handle the extension formalities and the enterprises may supplement the materials afterwards;
• The bonded goods donated or expropriated shall be released as soon as they are registered by the Customs;
• The Customs shall give priority to the import goods for Novel Coronavirus Pneumonia (Covid-19) prevention for registration or filing
• Additional tariff will not be imposed on US-origin goods imported for donation purpose, for Coronavirus prevention. For other US-origin goods, companies can apply for exclusion of the additional tariffs under new application mechanism
  

• Emergency investment of 300 million Yuan in the central budget: The Wuhan Huoshen Mountain Hospital and Wuhan Leishen Mountain Hospital, which are special subsidies for the treatment of patients with novel coronavirus-infected pneumonia, are mainly used to purchase important medical equipment and provide facility guarantee for the realization of “centralized patients, centralized experts, centralized resources, and centralized treatment”.

State Administration of Taxation, 11th of February, 2020

• Guidelines for Preferential Tax Policies for the Prevention and Control of the Epidemic Pneumonia Caused by Novel Coronavirus Infection:
• Involve 12 policies in four aspects, namely, supporting prevention and treatment, supporting material supply, encouraging public welfare donations and supporting the resumption of work and production.

The Ministry of Finance of PRC

• Pre-allocate subsidies for epidemic prevention and control: As of February 23, 99.5 billion Yuan of epidemic prevention and control subsidy has been allocated by the Ministry of Finance at all levels, of which 25.52 billion Yuan has been allocated by the central government to ensure the need for epidemic prevention and control funds.

Main sources of information

• China: Tax challenges and policy options, coronavirus epidemic
• China: Social security relief for enterprises, response to coronavirus (COVID-19)
• China: Income tax relief, response to coronavirus (COVID-19)
• China announces tax relief measures to tackle coronavirus disruption
• Managing China VAT issues effectively in turbulent times
• China releases guideline on advancing work resumption amid epidemic control

Tax: Christopher Xing - christopher.xing@kpmg.com
Restructuring: Wilson Pang – wilson.pang@kpmg.com
Legal: Paula Yu – paula.yu@kpmglegal.com.cn