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Shanghai Government’s Action Plan to Support Businesses

Fidinam Shanghai

50 policies in the Shanghai Government Action Plan: Which are the main ones and how can your company benefit from them?

 

Right before the end of the ten-week long lockdown, the authorities announced supportive measures to reboot its economy. In particular, on May 29, 2022, the Shanghai Municipal Government released its Action Plan of Shanghai for Accelerating Economic Recovery and Revitalization (Action Plan), which provides 50 measures in eight areas. Within this plan, a series of policies to stabilize foreign investment, promote consumption, and increase investment have been proposed.  

Subsequently, on June 10, 2022, the Shanghai Municipal Tax Service released the Guidelines on the Implementation of Tax Policies, as a supporting document to the abovementioned Action Plan. Divided into seven parts, the document clarified that the tax declaration periods would be extended, property tax and urban land use tax would be waived or reduced for enterprises in difficulty, refunds of excess input VAT credits would be expanded, VAT would be exempted for express delivery services, export tax rebates would be supported for foreign trade, taxes on the purchase of selected passenger vehicles would be reduced on a time-limited basis, and preferential tax policy would be implemented to encourage college graduates to get a job or start a business.

As the scope of the Action Plan is extremely broad, we will focus hereafter only on some key points which we believe to be the most relevant and practical measures for businesses.  

Deferment of fund and tax payments

The payment of social insurance premiums can be delayed in stages for companies in the catering, retail, tourism, aviation, and road, waterway, and rail transport industries from April onward. In particular: 

  • Payment of pension and medical insurance premiums can be deferred up until the end of 2022;
  • Payment of unemployment and work-related injury insurance premiums can be deferred for a period of up to one year;
  • Late payment fees can be waived during the deferred payment period.

In addition, employers that have been impacted by the COVID-19 containment measures can apply for deferred payment of housing provident funds. The deferral period is from April to December 2022, after which the payments must be made. During this period, employees who have already made payments and deposits can withdraw payments and apply for housing provident fund loans as normal and will not be impacted by the deferral of payments. 

People who have made deposits and have been impacted by the pandemic and cannot repay the housing provident loan as normal will not be subject to overdue fees, nor will this be included in their credit record. In addition, the withdrawal limit for employees who apply to withdraw housing provident funds to pay rent has been raised from RMB 2,500 to RMB 3,000 per household. 

Expanding the scope of rent reduction and exemption policies

Micro and small-sized enterprises (MSEs) and sole proprietorships that engage in production and business activities and rent state-owned property have previously been exempted from rent payments for a period of up to six months, without requiring them to provide proof of having been impacted by the pandemic.  

Subletters do not have the right to the rent exemption and the property owners are required to ensure that the rent exemption is extended to the primary lessee only. 

Non-state-owned property owners are also encouraged to reduce rent for MSEs and sole proprietorships that lease their property for business. Certain eligible companies that reduce rent for these businesses can get a subsidy of 30% of the total rent waived, capped at RMB 3 million, although the final amount is controlled in accordance with local government budgets. 

Measures for reducing operating costs

Non-resident users of utilities are eligible for up to 10% subsidies for water (including sewage treatment), electricity, and natural gas (except for gas used by gas-fired power generation companies). In addition, non-resident users’ utilities are not cut off if they fail to pay the fees in time during the COVID-19 containment period and are not subject to any penalties. Finally, non-resident users are exempted from over-quota and progressive water charges in 2022.  

Several other utility and fee reduction measures have also been imposed, including: 

  • A 10% decrease of the average tariff of broadband and private lines for small and medium-sized enterprises (SMEs);
  • A three-month waiver of unit domestic waste disposal fees;
  • A 50% reduction of the current standard of administrative fees for special equipment inspection and testing from April to December 2022.
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Tax rebates and reduction measures

The measures propose a further extension of VAT rebates to companies in six key industries. 

Currently, all companies in the following six industries, as well as MSEs, can apply for VAT rebates: 

  • Manufacturing
  • Scientific R&D and technology services
  • Electricity, heating, gas, and water production and supply
  • Software and information technology services
  • Ecological protection and environmental governance
  • Transport, logistics, warehousing, and postal

Moreover, companies that struggle to pay real estate and urban land use tax can apply for the reduction or waiver. However, companies engaging in industries whose development is restricted or discouraged by the state are not eligible for these tax waivers or reductions. 

Subsidies for maintaining or increasing headcount and training staff

Companies in industries hard-hit by the pandemic, such as catering, retail, tourism, transport, hospitality, and exhibitions are eligible for certain subsidies if they do not lay off staff or lay off few staff members. These companies are eligible for RMB 600 in subsidies for each staff member, capped at RMB 3 million per company. The full amount is calculated based on the number of urban employees that the company paid social insurance premiums for in the month prior to the application. 

Companies can also be eligible for a one-time subsidy of RMB 2,000 for each person they employ that has been unemployed for over three months or are 2022 graduates from universities in Shanghai. To be eligible, the companies must sign a labor contract of at least one year with the employee and pay social insurance premiums as required by law. 

Certain eligible companies that employ 2022 graduates from universities in Shanghai can receive RMB 7,800 in tax reductions for each fresh graduate they employ per year within three years. The measures however did not provide details on eligibility criteria. 

Companies and social organizations that have been impacted by the pandemic are also eligible for subsidies for providing online vocational training related to the business to their staff members and employees. The employer can receive a subsidy of RMB 600 for each employee receiving the training up to three times in 2022. Employees who obtain vocational qualification certificates for skilled personnel and vocational skill grade certificates can also receive subsidies. 2022 graduates can also return to their original schools to participate in skill level recognition and receive vocational skills improvement subsidies before the end of the year.

Fidinam can help

Should you want to know more about the available policies and those which could be more beneficial for your company and business, feel free to contact us at info@fidinamgw.com or click here to seek advice. Our professionals will assist you. 

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