Loans and Subsidies
a) Special Loans by the People’s Bank of China and Preferential Loans by Commercial Banks (“Special Preferential Loans”)
The People’s Bank of China shall issue Special Loans to relevant national banks and local corporate banks in key regions for epidemic prevention and control, and support them in providing Preferential Loans for enterprises which are on the Lists of Key Enterprises Securing Supplies for Epidemic Prevention and Control. Such enterprises (“Key Enterprises”) include e.g. manufacturers of medical facial masks, medical protective clothing, goggles and other protective supplies. They shall be determined by the competent governmental departments in order to be listed and to enjoy the relevant benefits.
The interest rate of Special Loans issued each month shall be 250 basis points (BP) less than the loan prime rate (LPR) of one-year loans in the previous month. The term of loans shall be one (1) year. When financial institutions provide credit support with preferential interest rates for relevant enterprises, the upper limit of the loan interest rate shall be 100 BP less than the last one-year LPR released at the time that the loan was granted.
b) Interest Discount Funds for Special Preferential Loans
For Key Enterprises that are entitled to Special Preferential Loans, the PRC Central Government shall offer interest discount support. On top of the interest rates on Special Preferential Loans, the Central Government shall offer interest subsidies at 50% of the loan interest rate actually obtained by enterprises. The term of interest discounts shall not exceed one (1) year.
c) Startup Guarantee Loans and Related Governmental Interest Discount Funds
From 15 April 2020 to 31 December 2020, the following entities or individuals shall be included in the scope of Startup Guarantee Loans and related governmental interest discount funds (such benefits were originally mainly targeted at individuals having difficulty finding employment):
- individual businesses temporarily losing income sources in industries/sectors greatly affected by COVID-19, i.e. wholesale and retail, accommodation and catering, logistic transportation, cultural tourism, etc.
- individuals buying cars with loans specially for taxi operation
- full-time drivers buying cars with loans to join online car-hailing platforms
- eligible taxi and online car-hailing enterprises or their subsidiaries, and
- individuals, having enjoyed policies on interest discount for Startup Guarantee Loans, having paid off loans on time and encountering business difficulties during the time of the epidemic, who can re-apply for Startup Guarantee Loans.
The maximum amount of Startup Guarantee Loans that an eligible individual can apply for is RMB 200,000; this may be raised up to 10% depending on the number of eligible individuals starting up business in a partnership. MSEs may apply for Startup Guarantee Loans up to RMB 2 million if the employees, newly-hired in a year who meet the application conditions for Startup Guarantee Loans, account for 15% of the existing employees (8% if the MSE has over 100 employees in total).
The period of Startup Guarantee Loans of MSEs and individuals/individual businesses temporarily encountering liquidity difficulties may be extended to 30 June 2020 at latest. In the extension period, interest discounts shall be granted by the local governments as usual. Where a borrower already provided with individual Startup Guarantee Loans has suffered from COVID-19, the extension period shall not exceed one (1) year in principle.
Financial institutions shall decrease the interest rates of newly- provided Startup Guarantee Loans with concrete standards such as: the upper limit of interest rate for Eastern China to be decreased from no more than LPR plus 100 BP to no more than LPR plus 50 BP.
As of 1 January 2021, the part of interest below LPR minus 150 BP of Startup Guarantee Loans to be newly provided to individuals and MSEs shall be undertaken by the borrowers, while the remaining part will be discounted by the government’s finance.
d) Local Loans
In accordance with local regulations (for example, the Several Measures of the Shanghai Municipal People’s Government on All-out Efforts in Epidemic Prevention and Control to Support and Serve Enterprises for Their Stable and Sound Development), local governments such as the Shanghai Municipal Government intend to provide low-cost finance assistance to affected enterprises including foreign-invested enterprises (“FIEs”) with the interest rate reduced to at least 25 BP below the prime rate. Shanghai’s guaranteed loans in policy finance will increase by at least RMB 3 billion in 2020, while the fees for new applications lodged by qualified MSMEs shall be cut to 0.5% yearly.
The PRC Ministry of Finance requires that:
- for Key Enterprises and MSEs greatly affected by COVID-19, governmental financing guarantee and re-guarantee institutions at all levels shall, inter alia, cancel counter-guarantee requirements and reduce the rates of guarantees and re-guarantees
- the National Financing Guarantee Fund shall halve the re-guarantee fees charged by governmental financing guarantee and re-guarantee institutions in the regions severely affected by the epidemic
- for MSEs which are incapable of repaying loans due to COVID-19, governmental financing guarantee institutions at all levels that provide financing guarantee services shall perform the obligation of subrogation in a timely manner, properly extend the period of recovery depending on the actual situation of the epidemic, and write off losses arising from the subrogation that meet the conditions of write-off in accordance with relevant provisions.
Social Insurance Contributions
a) Basic pension, unemployment and work-related injury insurances
In light of the epidemic impact and fund affordability, as of February 2020 in all provinces, autonomous regions and municipalities directly under the Central Government (excluding Hubei Province) and Xinjiang Production and Construction Corps (hereinafter collectively referred to as “provinces”), MSMEs can be exempted from paying the employer’s part of contributions to three kinds of social insurance schemes, i.e. basic pension insurance, unemployment insurance and work-related injury insurance, for a period of not more than five (5) months (i.e. from February 2020 to June 2020); while large enterprises can be exempted from paying 50% of the employer’s part of contributions to the above-mentioned three kinds of social insurance schemes for a period of not more than three (3) months (i.e. from February 2020 to April 2020).
b) Insurances in Hubei Province
As of February 2020, all enterprises in Hubei Province can be exempted from paying the employer’s part of contributions to the three kinds of social insurance schemes, i.e. basic pension insurance, unemployment insurance and work-related injury insurance, for a period of not more than five (5) months (i.e. from February 2020 to June 2020).
c) Medical insurance
As of February 2020, enterprises in all provinces including Hubei Province are entitled to be exempted from the employer’s part of contributions to the medical insurance scheme by 50% for a period of no more than five (5) months (i.e. from February 2020 to June 2020).
d) Social insurance premiums and housing fund
Enterprises suffering from operational difficulties due to the epidemic can apply for deferred payment of social insurance premiums and/or housing fund for no more than six (6) months in principle without paying late payment penalties.
e) Employment stabilisation subsidy
If an enterprise meets the requirements, including having duly paid unemployment insurance premiums according to law in the past, and its lay-off rate in the previous year is lower than the urban unemployment rate of the location where the enterprise is located, the enterprise can receive subsidies from the Government for stabilising employment relationships. The amount of such subsidy varies with locations – for example, in Shanghai it is 50% of the unemployment insurance premium paid by the enterprise and employees in the past year.
f) Training subsidy
Eligible enterprises that provide qualified offline and/or online occupational training for employees during the periods of work suspension and resumption of operation can enjoy training subsidies. In Beijing, for example, entities that are eligible for a refund of unemployment insurance premiums can receive RMB 1,000 per person for providing qualified occupational training to employees. In Shanghai, eligible enterprises can enjoy a 95% subsidy of actual training costs.
a) Policies in respect of key protective supplies
- if enterprises producing supplies for preventing and controlling COVID-19 (“Key Supplies”) acquire new equipment in order to increase production capacity, the cost of equipment can be deductible in a one-off manner for PRC Corporate Income Tax (“CIT”) purposes
- revenues obtained by taxpayers for transporting Key Supplies are exempt from VAT.
b) Policies supporting adversely affected industries
- enterprises in industries/sectors such as transportation, food serving, catering and tourism can carry the tax loss of 2020 forward for the following eight (8) years, compared with five (5) years under the CIT Law, for credit
- revenues obtained by taxpayers from providing public transportation services, lifestyle services and courier services delivering life necessities are exempt from VAT
- starting from 1 March 2020 to 31 December 2020, small-scale enterprises in Hubei Province can be exempt from VAT. In other provinces of China, the VAT rate on small-scale enterprises will be reduced from 3% to 1%.
c) Policies on donation for preventing and controlling COVID-19
- when donating cash and supplies for preventing and controlling COVID-19 through social welfare organisations, governments at county level or above and other government bodies, the cost can be fully deductible for CIT or Individual Income Tax (“IIT”) purposes
- when directly donating supplies to hospitals which prevent and treat COVID-19, the cost can be fully deductible for CIT or IIT purposes.
d) Relevant IIT policies
Medicines, healthcare supplies and protection supplies offered by employers to employees for the prevention of COVID-19 are exempt from IIT.
e) Property tax and urban land use tax reduction policies
Property tax and urban land use tax on landlords are reduced or exempted to encourage landlords to reduce or exempt rent for tenants.