China Extends Tax Breaks to Small Firms

To encourage venture capital investments in mainland start-up businesses, China plans to roll out more tax incentives, reports the South China Morning Post.


The incentives would also apply to small non-hi-tech firms as part of an effort to meet their increasing financing needs, says the newsaper.


The post says that with the tax incentive, if a venture capital fund posts net profit of 100 million yuan and has invested 10 million yuan in a start-up hi-tech firm, 70 percent of the investment can be offset against the fund's net profit. Consequently, the fund's taxable net profit is reduced by 7 million yuan, meaning only 93 million yuan of actual net income is subject to the corporate income tax. Thus its tax bill is reduced by 1.75 million yuan.


Under current rules, a mainland venture capital group is subject to profits tax of 25 percent.