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Policies to support micro and small enterprises and self-employed businesses

Source: Updated: 2020-08-09

During the first half of this year, a slew of policies were rolled out by the State Council to aid micro and small enterprises and self-employed businesses affected by the epidemic.

Tax and fee cuts

Tax and fee cuts policies that were expiring before June are extended to the end of this year, including the exemption of value-added tax (VAT) for public transport, catering and accommodation, tourism and entertainment sectors.

Exemption of social insurance fees for micro, small and medium-sized enterprises will be continued until the end of December, 2020. Enterprises in severe difficulties due to the epidemic impact could delay the payment of social insurance fees to the end of the year and will not be charged overdue fines.

According to the State Taxation Administration, after pre-payment declaration in this year's tax filing period from May 1 to Dec 31, small and low-margin businesses can postpone the payment of current income tax to the first filing period of 2021. Also, self-employed businesses are allowed to postpone the payment of individual income tax after filing the tax declaration to 2021.

The policy cutting VAT for small and micro enterprises and self-employed businesses will also be extended to the year's end.

Social insurance fees on the part of self-employed businesses could be exempted or postponed. And a long-term mechanism to reduce the tax and fees burden of small and micro enterprises will be established.

Cost reduction

Platform companies are encouraged to reduce service fees charged to small and micro enterprises, and unfairly charged high service fees based on the platform's dominant position in the market are not allowed.

General Office of the State Council released a circular, urging deepening the reform of decoupling business licenses from operation permits. Registration procedures of the location (business premises) should be simplified, enabling applicant to register just by submitting the certificate of legal use of the premises. Management model for vendors without fixed business sites should be set up, and space for free markets and stalls should be reserved.

According to the National Development and Reform Commission, from July 1 to Dec 31, 2020, power grid companies should continue to charge 95 percent of the original electricity price from power users who are following general industrial and commercial electricity price and large industries' electricity price, except for those in high-energy-consuming industries.

Small and micro enterprises and self-employed businesses in the service industry that have difficulties in renting State-owned housing for operation can be exempted from three months' rents in the first half of the year. If the exemption period is insufficient in the first half of the year, it can be supplemented or extended in the second half of the year.

Convenient financing

Five institutions including the People's Bank of China issued a notice stating that banking financial institutions shall extend payment time for the principal and interest of inclusive small and micro loans due from June 1 to Dec 31, 2020, after receiving application. The payment time can be extended to March 31, 2021, without default interest.

The People's Bank of China and the Ministry of Finance have injected 400 billion yuan for re-lending to promote banks to increase credit loans for small and micro enterprises, enabling more of them to obtain credit loan free of mortgage or guarantees.

The ministry issued a notice requiring local governmental financing guarantee and re-guarantee institutions at all levels to halve financing guarantee and re-guarantee fees for small and micro enterprises throughout 2020, striving to reduce the comprehensive financing guarantee rate for small and micro enterprises to less than 1 percent.

The ministry also required that the proportion of newly-added financing guarantees to support small and micro enterprises and agriculture sector should be no less than 80 percent in 2020.
Monetary policy tools such as refinancing and rediscounting for small and medium-sized enterprises will be used to guide commercial banks to increase credit supply.

Financial institutions are encouraged to initiate innovative products and services, develop convenient refinancing business and credit loans, increase initial loans, medium- and long-term loans, intellectual property pledge loans for small and micro enterprises. Supply chain finance, accounts receivable financing should be developed, and cooperation between tax and banking sectors should be strengthened.

Services to small and micro enterprises provided by commercial banks should be related to assessment and evaluation of financial institutions.

Entrepreneurship and investment market will be cultivated, and the incentive and exit mechanisms for entrepreneurship and investment should be improved. Angel investors, private equity, venture capital will be guided to expand equity financing for SMEs.

Support to small shops

Small shops that comply with relevant laws and regulations and approved by interested parties will be supported to register business licenses with residence as business site, and e-commerce operators can register business licenses with online business premises as business site, easing their access to the market.

Qualified small shops along the streets are allowed to carry out outdoor business without affecting public transportation and the lives of surrounding residents.

Shared offices, outdoor booths are encouraged to bring down rent level in the market.

Leasing market of houses for business purpose will be regulated, and raising rents will not be allowed while subletting.

Unreasonable markups in power supply will be regulated, and the collection of water and sewage charges for small shops will be standardized.

Local governments are encouraged to make good use of employment subsidy funds, unemployment insurance funds, special funds for vocational skills improvement, and employees' education funds and provide support to qualified small shops.

Qualified small shops and their operators can apply for guarantee loans for startups and financial discounts.

Financial institutions are encouraged to optimize the evaluation methods and incentive mechanisms when providing credit support to small shops, further improving the quality and efficiency of financial services, reducing comprehensive financing costs of small shops. Inclusive financial products suitable for asset-light small shops should also be developed.