Page 9 - REPORT ON THE EXECUTION OF THE CENTRAL AND LOCAL BUDGETS FOR 2018 AND ON THE DRAFT CENTRAL AND LOCAL BUDGETS FOR 2019

 We took strong measures to cut taxes and fees.
Improving the VAT system

We lowered VAT rates in industries such as manufacturing, transportation,
construction, and basic telecommunication services as well as for agricultural
products and other goods, and adopted a unified annual sales threshold of 5
million yuan for small-scale VAT payers. The end-of-tax-period VAT credit was
refunded in one lump sum to qualified enterprises in equipment manufacturing
and other advanced manufacturing industries and in research and development
(R&D) and other modern service industries, as well as to power grid enterprises.

Implementing individual income tax reform
Implementing the revised Individual Income Tax Law, we raised the
individual income tax threshold and optimized the structure of tax rates,

starting from October 1, 2018. On this basis, we formulated the interim measures
for special additional deductions for individual income tax, creating six special
additional deduction items including children’s education, and amended the
implementation regulations for the Individual Income Tax Law, which officially
went into effect on January 1, 2019. This represents a major shift from a system
of classified taxes to a system of taxation that is based on both adjusted gross
income and specific income types, benefiting approximately 80 million
taxpayers.
Increasing tax support for small and micro businesses

More low-profit small businesses now enjoy halved corporate income tax,
with the upper limit of taxable annual income raised from 500,000 yuan to
1,000,000 yuan. We raised the single-client credit line on which the interest
income is eligible for VAT exemption from 1 million yuan to 10 million yuan in
loans made to qualified small and micro businesses and self-employed people.

Encouraging enterprises to increase investment in research and development
We abolished the restrictions on additional tax deductions for R&D costs for
those enterprises who entrust their R&D work to overseas contractors. The
policy of additional tax deductions for 75% of R&D expenses for small and

medium sci-tech enterprises was extended to cover all enterprises. The period
for rollover of losses was extended from 5 years to 10 years for new- and
high-tech enterprises and small and medium sci-tech enterprises. A one-off tax
deduction in the year of purchase will be offered to enterprises for new
instrument or equipment purchases of less than 5 million yuan in unit price.
Adjusting and improving import and export tax policies

Export rebate rates were raised for over 4,000 products in two batches and
the rebate rate structure was simplified. We accorded zero tariff treatment to the

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