Support for small and medium-sized manufacturing enterprises: the policy of deferring tax and fee payments is extended by another 4 months

To thoroughly implement the decisions and deployments of the CPC Central Committee and the State Council, further support the development of small and medium-sized manufacturing enterprises, and continue to help enterprises overcome difficulties, on September 14, the State Taxation Administration jointly with the Ministry of Finance issued the "Announcement on Matters Concerning the Continued Deferral of Payment of Certain Taxes and Fees for Small and Medium-sized Manufacturing Enterprises" (No. 17 of 2022, hereinafter referred to as the "Announcement"), which clarifies that, effective from September 1, 2022, for medium-sized manufacturing enterprises that have enjoyed a 50% deferral of tax and fee payments and small manufacturing enterprises that have enjoyed a 100% deferral under the "Announcement of the State Taxation Administration and the Ministry of Finance on Continuing the Implementation of Matters Concerning the Deferral of Payment of Certain Taxes and Fees for Small and Medium-sized Manufacturing Enterprises" (No. 2 of 2022), the deferral period for taxes and fees already deferred will be extended by an additional 4 months after the expiration of the original deferral period.

1. Which specific taxes and fees are included in the continued deferral of payment as stipulated in the Announcement?

The taxes and fees eligible for deferred payment under this Announcement include corporate income tax, individual income tax, domestic value-added tax, domestic consumption tax, and the surcharges of urban maintenance and construction tax, education surcharge, and local education surcharge that have been deferred in accordance with regulations for the periods of November and December 2021, and February, March, April, May, and June 2022 (for monthly filers), or for the fourth quarter of 2021, and the first and second quarters of 2022 (for quarterly filers). This does not include taxes and fees withheld and remitted, collected and remitted on behalf of others, or paid when applying to the tax authorities for the issuance of invoices on their behalf.

Since the tax deferral periods for October 2021 and January 2022 have expired, taxpayers are required to pay and remit the taxes in August 2022 in accordance with regulations, and this Announcement does not apply.

Taxes and fees incurred from August 2022 (or the third quarter for quarterly payments) onwards shall be declared and paid in accordance with regulations.

II. When should the taxes and fees whose payment has been continued to be deferred as stipulated in the "Announcement" be paid into the treasury?

The applicable periods are November and December 2021 (including taxes and fees for the fourth quarter of 2021 paid on a quarterly basis). The deferred payment of taxes and fees is extended by an additional 4 months on top of the previous 9-month extension (for a total extension of 13 months), with payments to be made in January and February 2023 respectively.

The deferred tax payments for the periods of February, March (including taxes paid quarterly for Q1 2022), April, May, and June 2022 (including taxes for Q2 2022) are extended by an additional 4 months on top of the initial 6-month extension (totaling a 10-month extension), with payments due from January 2023 to May 2023. See the table below for specific deferral periods:

(1) Taxpayers who file and pay taxes on a quarterly basis

(2) Taxpayers who file and pay taxes on a monthly basis

3. How can small and medium-sized manufacturing enterprises continue to benefit from the deferred tax payment policy?

To facilitate taxpayers' access to this policy, the tax authorities have optimized and upgraded the information system. For small and medium-sized manufacturing enterprises that have already benefited from the tax deferral policy as stipulated in Announcement No. 2 of 2022, the deferral period will be automatically extended by four months upon expiration, without any action required from the taxpayer.

Example 1: Taxpayer A is a small or medium-sized manufacturing enterprise as defined in Announcement No. 2 of 2022, and files and pays relevant taxes and fees on a monthly basis. Previously, Taxpayer A had deferred the payment of taxes and fees for the period of November 2021 in accordance with regulations, with a deferral period of 9 months, meaning that under the original policy, payment would have been due before the end of the filing period in September 2022. Following the issuance of this Announcement, the payment deadline for taxes and fees for November 2021 is automatically extended by 4 months, allowing them to be paid together when filing and paying taxes and fees for December 2022 during the January 2023 filing period.

If Taxpayer A files and pays relevant taxes and fees on a quarterly basis, and has already deferred the payment of relevant taxes and fees for the fourth quarter of 2021 in accordance with regulations, with a deferral period of 9 months, the original policy required payment before the end of the filing period in October 2022. Following the issuance of this Announcement, the payment deadline for relevant taxes and fees for the fourth quarter of 2021 is automatically extended by 4 months, allowing payment during the filing period in February 2023.

Example 2: Taxpayer B is a self-employed individual in the manufacturing industry who qualifies for tax deferral and adopts simplified declaration, paying taxes on a quarterly basis. For the relevant taxes and fees deferred in the fourth quarter of 2021, the taxpayer does not need to take any action to confirm the deferral. The tax authorities will temporarily suspend the deduction of personal income tax, value-added tax (VAT), consumption tax, and the surcharges for urban maintenance and construction tax, education surcharge, and local education surcharge for the fourth quarter of 2021 in October 2022. The deferral period for these taxes and fees is extended by another four months, and the tax authorities will deduct them and transfer them to the treasury in February 2023.

4. How can taxpayers who have already paid the taxes and fees deferred from November 2021 and February 2022 into the treasury after September 1, 2022, and before the release of this announcement enjoy the continued deferral policy?

For small and medium-sized manufacturing enterprises, taxes and fees deferred for payment in November 2021 and February 2022 that have already been paid and deposited into the treasury after September 1, 2022, and before the release of this announcement, may voluntarily apply for a tax (fee) refund and continue to benefit from the deferred payment policy.

Example 3: Taxpayer C, in accordance with the provisions of Announcement No. 2 of 2022, deferred the payment of taxes and fees for the period of February 2022, and completed the payment into the treasury on September 5, 2022. For this portion of taxes and fees, they may voluntarily apply for a tax (fee) refund and enjoy the continued deferral policy.

5. For taxpayers who deferred payment of corporate income tax in the fourth quarter of 2021, the deferral period may be extended by an additional 4 months in accordance with this Announcement. How should the additional tax payable arising from the 2021 annual settlement be handled?

In accordance with the provisions of Announcement No. 2 of 2022, small and medium-sized manufacturing enterprises that enjoyed the policy of deferred payment of corporate income tax in the fourth quarter of 2021 may defer the payment of any additional corporate income tax arising from the 2021 annual final settlement together with the tax already deferred in the fourth quarter of 2021. In accordance with this Announcement, such tax payments may be further deferred by four months.

Example 4: Taxpayer D, who files and prepays corporate income tax on a quarterly basis, had a corporate income tax liability of RMB 100,000 for the fourth quarter of 2021. In accordance with Announcement No. 2 of 2022, this tax payment could be deferred until October 2022. Following the issuance of this Announcement, the deferral period is further extended by four months, allowing payment to be made in February 2023.

Furthermore, if the taxpayer has a tax payable of RMB 200,000 from the 2021 annual corporate income tax final settlement, it may be paid and deposited into the treasury in October 2022 in accordance with the previous deferred payment policy. After the announcement of this Notice, the payment can be further deferred by 4 months until February 2023, together with the RMB 100,000 tax for the fourth quarter of 2021.

6. Does a taxpayer's enjoyment of the tax deferral policy affect their handling of the annual reconciliation of individual income tax on business income?

Taxpayers benefiting from the tax deferral policy who handle the annual settlement of individual income tax on business income shall continue to follow the treatment rules stipulated in the previous tax deferral policy. Specifically, the deferred tax payments shall be treated as "prepaid taxes" and normally participate in the calculation of refunds or additional payments for the annual settlement of individual income tax on business income. Meanwhile, after the expiration of the deferral period specified in this Announcement, taxpayers shall pay the corresponding deferred taxes and fees in accordance with the law.

Example 5: Taxpayer E is an individual industrial and commercial household in the manufacturing sector with annual sales of RMB 1 million, subject to audit-based collection and quarterly filing of individual income tax on business income. Under the previous tax deferral policy, during the July 2022 filing period, Taxpayer E chose to defer the individual income tax prepayment due for the second quarter of 2022 to the January 2023 filing period. After the announcement of this Notice, the deferral period for the aforementioned taxes is further extended by four months, with payment due in the May 2023 filing period. When Taxpayer E completes the final settlement of individual income tax on 2022 business income by March 31, 2023, the deferred tax amount shall be treated as "prepaid tax" and normally included in the calculation of additional tax payable or refundable for the final settlement of individual income tax on business income. Any additional tax payable must be settled by March 31, 2023; if a refund is due, it may be applied for normally, unaffected by the deferral policy for the second quarter of 2022 taxes. Meanwhile, the previously deferred taxes must be paid during the May 2023 filing period.

7. After small and medium-sized manufacturing enterprises enjoy the tax and fee deferral policy stipulated in this Announcement, can they apply for an extension of tax payment in accordance with the law?

Manufacturing micro, small and medium-sized enterprises that meet the conditions stipulated in this Announcement, and that satisfy the conditions for applying for deferred tax payment under the Law of the People's Republic of China on Tax Collection and Administration and its implementing rules, may apply for deferred tax payment in accordance with the law.