Policy Content

According to the "Announcement on Implementing Personal Income Tax Preferential Policies to Support the Development of Individual Businesses", for individual businesses with an annual taxable income of no more than 1 million yuan, the personal income tax will be further reduced by half on the basis of the current preferential policies.

Individual businesses will calculate the amount of tax reduction by the following formula: Tax reduction amount = (tax payable on the portion of the annual taxable income of individual businesses that does not exceed 1 million yuan - tax reduction amount under other policies x the portion of the annual taxable income of individual businesses that does not exceed 1 million yuan/total annual taxable income of individual businesses) x (1 - 50%).

Policy Background

To implement the decisions and arrangements of the CPC Central Committee and the State Council, support the development of individual businesses, and ensure that tax reduction policies are implemented for individual businesses, the Ministry of Finance and the State Administration of Taxation jointly issued the "Announcement of the Ministry of Finance and the State Administration of Taxation on Preferential Tax Policies for Small and Micro Enterprises and Individual Businesses" (No. 6 of 2023), which extends the personal income tax reduction policy for individual businesses until December 31, 2024.

Scope of Application

Individual businesses can enjoy the tax reduction policy regardless of the method of tax collection.

Individual businesses can enjoy the tax reduction policy when paying the prepayment and the final settlement of personal income tax. They do not need to file for the policy and can enjoy it by filling in the relevant items of the personal income tax declaration form and the tax reduction report. For individual businesses that declare through the electronic tax bureau, the tax authority will provide them with automatic pre-fill service for the relevant forms and reports. For individual businesses that adopt the simplified declaration method of fixed amount, the tax authority will withhold and remit the tax according to the reduced tax amount.

Q&A

1. How can an individual business owner with multiple sources of business income enjoy the preferential policies?

Answer: Taxpayer Zhang runs individual businesses A and B at the same time, with annual taxable income of 800,000 yuan and 500,000 yuan, respectively. When Zhang submits the annual consolidated tax declaration, he can enjoy the policy of halving the personal income tax on the taxable income of up to 1 million yuan.

1. How is the tax reduction and exemption amount calculated?

Answer: The tax reduction and exemption amount = (the amount of tax payable for the taxable income not exceeding 1 million yuan of individual business income - the tax reduction and exemption amount for other policies × the taxable income not exceeding 1 million yuan of individual business income ÷ the total taxable income of the business income) × (1-50%).

Taxpayer Li runs individual business C with an annual taxable income of 80,000 yuan (applying a tax rate of 10% and a quick deduction of 1,500 yuan), and can enjoy a tax reduction and exemption of 2,000 yuan under the disability policy. Therefore, Li's tax reduction and exemption amount for this policy is [(80,000×10%-1500)-2000] × (1-50%) = 2,250 yuan.