As the outbreak of the novel coronavirus (COVID-19) in China slow down business activities, regional governments of China have released various measures to support enterprises with operations in China that have been especially effected by the outbreak such as SME and those operating in certain industry such as tourism, retail and many others. This article outlines some of the regional measures available.
Latest update: 18, February 2020
To tackle the challenges brought about by novel coronavirus in China and ensure stable economic development amid the outbreak, many mainland cities have enacted policies to support the companies which are operating in China in terms of finances and operations. Examples include deferral in social insurance and tax payments in order to support enterprises during this difficult period, subsidies for rents, and exempting enterprises from paying property and urban land use taxes.
Regional measures to support businesses in China:
On February 5 2020, the Beijing government announced 16 preferential policies to sustain the production and operation of SMEs. State-owned properties are instructed to exempt SMEs from rent for February if the firms have suspended or maintained operations without laying off many employees. Loans to enterprises facing temporary difficulties amid the outbreak shall not be suspended or withdrawn in advance. The lending growth of major state-owned banks to small and micro-businesses should be no lower than 20 percent.
Companies that fail to pay social security premiums due to the coronavirus outbreak will not have their welfare entitlements compromised. Meanwhile, the city has extended the collection period to allow companies in industries which have been more hardly hit by the virus such as tourism, hospitality and catering, to delay their payments of social insurance premiums.
On 8 February 2020, Shanghai Municipality released 28 measures to steady businesses during the novel coronavirus outbreak, with immediate effect. Many of them are aiming to intensify fiscal support for enterprises playing key roles in epidemic prevention (such as companies producing key supplies), while others are applicable to companies in difficulties such as temporary reduction or waiving of rentals, tax incentives for enterprises and individuals under certain criteria, preferential loan and financial support etc. Amongst others, special attention has been given to measures aiming to aid businesses and stabilize employment, such as:
- For companies that have maintained their current headcount or those that have minimised layoff rates in 2020, 50 percent of the unemployment insurance they paid in the previous year shall be refunded. This measure was already in place in Shanghai, and it has been extended for year 2020.
- The adjustment of the social security payment period shall be postponed by three months, with the new period set from 1 July 2020, to 30 June 2021.
- Enterprises facing difficulties in paying the social insurance in time can apply for an extension and defer the payment within 3 months after the epidemic ends. No overdue fines shall be charged.
- For companies that have organized online vocational training during the operation suspension period, 95 percent of training fees shall be subsidised by the districts where the companies are based. New business models, such as e-commerce platforms, can also be included in this subsidy plan.
The Suzhou Municipal Government issued ten preferential policies on 2 February 2020, to support the SMEs facing difficulties in production and operations by reducing their loans, rents and social security payment burdens. Below is a quick summary extracted from these ten policies.
- Banks shall not, without good reason, request early repayment, cancellation or delays for loans to micro and small businesses.
- For enterprises that have not laid off employees, 50% of unemployment insurance premiums made over the previous year may be refunded.
- SMEs are accordingly allowed to suspend the payment of endowment insurance, unemployment insurance and work-related injury insurance for up to six months.
- SMEs that rent state-owned commercial premises shall have one month of free rent and two months of halved rent.
- Enterprises that have faced huge losses in production and operations due to the epidemic can apply for a reduction in and exemption of real estate taxes or urban land use taxes.
On 4 February 2020, the Chongqing municipality rolled out a total of 20 measures of support in various fields, including administrative approval, imports, tax and finance, to help SMEs get through the ongoing virus prevention and control period during which time their businesses might be impacted. The measures are in effect until 30 June 2020.
According to the notice from the Chongqing Municipal People's Government, approval is not needed for enterprises when purchasing imported supplies, including drugs and medical instruments, which can enjoy instant customs clearance and exemption from taxes. To reduce the burden on companies, many of which have been ordered to postpone business to lower the risk of spreading the virus, Chongqing will cut a certain amount of tax for them or extend deadlines for tax declaration. For enterprises with bank loans, the city demands local banks loosen policies for loan applications, use and repayments.
Likewise, the government of Zhejiang Province said on 5 February 2020, that they would adopt 17 measures concerning cost reduction, tax relief, financial services and exports support to help enterprises get through the plight to business caused by the epidemic.
The provincial government will further cut the costs of electricity, water and other necessary elements for production by 10 percent over the following three months and it will offer applicable companies tax and insurance reductions or allow them to delay their payments. Financial services, such as loans to small and micro-enterprises, will be improved to reduce their burden and facilitate their operations. For those with export businesses, certificates of force majeure shall be provided and fees for inspection and quarantine will be lowered from February to April, while subsidies for credit insurance premiums shall be given as well.
Manufacturing of medical supplies and life necessities
On 5 February, the State Council announced that as provisional policies began from January 1, enterprises producing key supplies will be able to get their taxes on payments for expanding production capacity deducted in full on a one-time basis. Meanwhile, revenue from transporting key emergency supplies and providing public transportation, essential services and express mail services can enjoy value-added tax exemption. The registration fee for drugs and medical equipment for novel coronavirus containment is also waived. Banks shall offer preferential loans at fiscally subsidized interest rates below 1.6 percent for enterprises that produce, transport or sell medical supplies and necessities for life.
Financial incentives and tax filing deadline extension
China’s State Tax Administration has announced an extension for the deadline for February tax filing. February tax filing in China has been extended, nationwide, from the originally planned deadline of 17 February 2020, to 28 February 2020, according to the latest news as of 17th February. The exception is the province of Hubei whose tax deadline has been postponed to 6th March. The extension of the tax deadline is among the measures taken by the Chinese authorities to help those companies whose business has been affected by the outbreak and operations disrupted. In addition, the tax authorities are expanding and promoting online services for taxpayers to increase efficiency and reduce onsite visits at tax offices for handling tax affairs.
Besides, subject to approval of tax authorities, it is further allowed to extend the tax filing period and tax payment period to companies especially affected by the outbreak under certain circumstances (such as impossibility to submit the tax declaration or to pay tax due to cash flow problems).
Fabio Stella, Associate Director and China Head of BD and Sales at Hawksford says: "Our commitment to China and Asia puts us in the front line of assisting foreign subsidiaries located in the jurisdictions affected by the outbreak and their headquarters back at home. A daily direct line with our clients’ staff via our account managers caters to both decision-makers and financial/administrative personnel in navigating the various regulations issued during and after the extended CNY break. With travel restrictions, entry ban and safety measures adding a level of complication to foreign businesses in China and elsewhere, our teams can help bridge communications and operations for our clients, and ultimately prioritizing their concerns."
How can Hawksford help you?
If you are planning to enter the Chinese market, we can assist you with business registration and formation, accounting bookkeeping, tax filing and annual returns filing services. If you are already based in China, we can assist you with HR, accounting consultancy issues such as terminating contracts, negotiations of extended timelines on the renewal of certificates, contract performance, rent exemption and much more.
Hawksford is an established provider of company registration and outsourced corporate services in China. With 100 multilingual professionals based in Shanghai, Beijing, Suzhou, Guangzhou and Shenzhen, we are able to offer the very best local knowledge to our international clients.
This document is for informational purposes only. It does not constitute advice and should not be relied upon as such. Please seek professional advice appropriate to your particular circumstances or requirements. If you would like further information on any matter raised in this document, please contact us.
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