First, a critical distinction:
1. Small-scale taxpayer (小規模納稅人) – a concept under Value-Added Tax (VAT). It refers to taxpayers with low rolling 12 months VAT sales (generally ≤ RMB 5 million) who cannot deduct input VAT and are subject to simplified VAT rates (e.g., 3%, or temporary reduced rates).
2. Small and Low-Profit Enterprise (小微企業) – a concept under Corporate Income Tax (CIT). It refers to an enterprise that meets specific criteria for total assets, employee count, and annual taxable income, thereby qualifying for a reduced CIT rate (5% instead of 25%).
These two statuses are independent of each other. An entity may be one, both, or neither. This article focuses exclusively on the CIT-related “Small and Low-Profit Enterprise” status.
Under current Chinese tax policy (effective until December 31, 2027), an enterprise must meet all three quantitative thresholds simultaneously, and operate in a non-restricted/non-prohibited industry:
| Criterion | Threshold |
|---|---|
| Annual taxable income | ≤ RMB 3 million |
| Total assets | ≤ RMB 50 million |
| Number of employees | ≤ 300 persons |
Important notes:
1. These three indicators are cumulative (all must be met).
2. For non-legal entity branches, their employee count, assets, and taxable income are consolidated into the parent company’s calculation.
3. The enterprise must not be engaged in industries restricted or prohibited by the state.
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