The National Development and Reform Commission ("NDRC") and other authorities have, in recent months, issued several policies for Promoting the Recovery of "Stranded" Industries in the Service Sector.

The Policies propose measures from several aspects, generally revolving around inclusive bailout and support, and include various industries, as discussed in this article.

Inclusive bailout and supports

The announcement will extend the value-added tax deductions, whereby taxpayers in 2022 in the production and living service industries will continue to enjoy deductions of extra input tax by 10% and 15%, respectively.

They will expand preferential treatment for reducing resource tax, urban maintenance and construction tax, real estate tax, etc., from small-scale VAT taxpayers to small low-profit enterprises and self-employed businesses. 

Meanwhile, the government will encourage local governments to grant exemptions for taxpayers who are having difficulties paying real estate tax and urban land use tax in 2022, according to the regulations and local conditions.

SMEs can enjoy the increase in pre-tax deduction of equipment where equipment and appliances with a unit value of more than five million yuan were newly purchased by SMEs in 2022. The depreciation period of three years for the equipment and appliances can be selected as a one-off pre-tax deduction. The depreciation period of four years, five years and ten years can be deducted by half.

Insurance rates for unemployment and work-related injury are reduced for companies that do not lay off or reduce employees and give them unemployment insurance refunds.

SMEs and self-employed businesses renting state-owned property located in a high-risk area of the pandemic can enjoy a rent exemption for up to six months, subject to conditions being met. 

Lastly, the policy encourages and pushes banks and financial systems to make good use of the funds released, reducing credit limit criteria and prioritising supporting difficult industries.

Bailout and support for specific industries

Besides the above inclusive policies, the authorities also have measures specifically for several essential industries besides the service sector. These industries include catering, retail, tourism, transportation and civil aviation industries, and each is subjected to different policies.

The policies mainly focus on postponing unemployment insurance and work-related injury insurance premiums, postponing the obligation of pre-paid VAT, strengthening cooperation between the above industries with banks and financial sectors, and providing subsidies or other measures to help reduce the impact of Covid-19.

Recommendations

Any business in China that has difficulty managing its operations and cash flow during Covid should review their position relative to the support being provided to see if they can qualify for any of the policies or consider consulting with a professional services firm to carry out a review.