In order to implement the "Announcement of the Ministry of Finance and the State Taxation Administration on Further Supporting Tax and Fee Policies for the Development of Small and Micro Enterprises and Individual Businesses" (No. 12 of 2023, hereinafter referred to as "Announcement No. 12"), and to further support the development of individual businesses, the State Taxation Administration has issued the "Announcement of the State Taxation Administration on Further Implementation of Personal Income Tax Preferential Policies to Support the Development of Individual Businesses".

Policy Content

For individual businesses with annual taxable income not exceeding 2 million yuan, a 50% reduction in personal income tax will be applied. Individual businesses can enjoy this preferential policy in addition to the existing personal income tax preferential policies.

To further support the development of individual businesses, this announcement increases the policy benefits by expanding the annual taxable income range eligible for the 50% reduction in personal income tax from not exceeding 1 million yuan to not exceeding 2 million yuan.

To maximize the release of tax reduction benefits, individual businesses that have already pre-paid taxes on operating income in the first few months of this year can also enjoy tax benefits. The specific method is as follows: for taxes that are eligible for reduction according to Announcement No. 12 and have been paid before the issuance of this "Announcement," taxpayers can apply for tax refunds; these taxes can also be automatically offset against taxes for future months, and any remaining amount not offset within the year can be refunded when settling the annual tax return. For businesses that were deregistered before the issuance of Announcement No. 12, they are not eligible to retroactively enjoy these benefits.

Policy Subjects

Both audited and self-declared individual businesses, regardless of the method of taxation assessment, can benefit from the 50% tax reduction policy.

Q&A and Calculation Method

1. How do individual businesses with income from multiple sources enjoy the preferential policy?

According to the current policy, taxpayers with income from more than two sources of business operations should choose to submit annual summary declarations to the tax authority where one of the businesses is located. If an individual business obtains income from more than two sources, they need to consolidate the annual taxable income from these sources when submitting the annual summary tax declaration, recalculate the tax reduction amount, and either receive a refund or make additional payment if necessary.

2. Individual businesses calculate the tax reduction amount as follows:

Tax Reduction Amount = (Taxable Amount of Business Income not exceeding 2 million yuan - Other Policy Tax Reduction Amount × Taxable Amount of Business Income not exceeding 2 million yuan / Taxable Amount of Business Income) × 50%.

Examples:

Taxpayer Li operates individual business C, with an annual taxable income of 80,000 yuan (subject to a tax rate of 10% and a quick deduction of 1,500 yuan). Additionally, Li can benefit from a policy that provides a tax reduction of 2,000 yuan for disabled individuals. Therefore, Li's tax reduction amount under this policy would be calculated as follows: [((80,000 × 10%) - 1,500) - 2,000] × 50% = 2,250 yuan.

Taxpayer Wu operates individual business D, with an annual taxable income of 2,400,000 yuan (subject to a tax rate of 35% and a quick deduction of 65,500 yuan). Wu can also benefit from a policy that provides a tax reduction of 6,000 yuan for disabled individuals. Wu's tax reduction amount under this policy would be calculated as follows: [((2,000,000 × 35%) - 65,500) - (6,000 × 2,000,000 ÷ 2,400,000)] × 50% = 314,750 yuan.