Ministry of Finance and State Administration of Taxation

 

Notice on exemption of VAT policy on interest income on loans of small and micro enterprises of financial institutions

 

Finance and Taxation (2018) No. 91

 

Provincial Departments, Autonomous Regions, Municipalities, and Planned Cities of the Ministry of Finance (Bureau), State Administration of Taxation, Provincial Taxation Bureaus of the Provinces, Autonomous Regions, Municipalities, and Planned Cities, Xinjiang Production and Construction Corps Finance Bureau

 

In order to further increase support for small and micro enterprises, the policy of exempting VAT on interest income on loans from small and micro enterprises of financial institutions is as follows:

 

1. From September 1, 2018 to December 31, 2020, interest income from financial institutions issuing small loans to small enterprises, microenterprises, and individual industrial and commercial households is exempt from value-added tax. Financial institutions can choose to apply tax exemption in one of two ways:

 

(1) Interest income from a single small loan issued by a financial institution to small enterprises, microenterprises, and individual industrial and commercial households at an interest rate level not higher than 150% (including the principal) of the benchmark interest rate of the People's Bank of the same period is exempt from value-added Tax; interest income from a single small loan that is 150% higher than the benchmark interest rate of the People's Bank of China for the same period is subject to VAT in accordance with the current policy.

 

(2) The interest income from a single small loan issued by a financial institution to small enterprises, microenterprises, and individual industrial and commercial households is not higher than the interest calculated on the loan's benchmark interest rate of 150% (including the principal) of the People's Bank of China for the same period The income part is exempt from VAT; the excess part is subject to VAT in accordance with the current policy.

 

A financial institution may choose one of the above two methods as the applicable tax exemption method for that year according to the accounting year. Once selected, it cannot be changed within the accounting year.

 

2. The financial institutions referred to in this notice refer to the institutions approved by the People's Bank of China and the China Banking Regulatory Commission that have passed the "two-plus-two-control" assessment by the regulatory authorities in the previous year (the list of institutions that passed the assessment in 2018 was implemented in the first half of 2018) The "two increase and two controls" target shall prevail), as well as development banks and policy banks, foreign banks and non-banking financial institutions established with the approval of the People's Bank of China, the Banking and Insurance Regulatory Commission, and the Securities Regulatory Commission. "Two increase and two controls" refers to the small- and micro-enterprise loan growth of less than 10 million yuan (inclusive) for single-family loans. The year-on-year growth rate of loans is not lower than the year-on-year growth rate of various loans. Reasonably control the quality of loan assets of small and micro enterprises and the level of comprehensive loan costs (including interest rates and loan-related banking service charges). The completion of “two increases and two controls” by financial institutions is subject to the assessment results of the CBRC and its dispatched agencies.

 

3. The small enterprises and micro-enterprises referred to in this notice refer to the small enterprises and micro-enterprises that conform to the "Standards for Small and Medium-sized Enterprises" (Ministry of Industry and Information Technology [2011] No. 300). Among them, the total assets and employees' indicators are determined based on the actual status of the loan when it is issued; the operating income indicators are determined based on the cumulative number of 12 natural months before the loan is issued, and those less than 12 natural months are calculated according to the following formula:

 

Operating income (year) = operating income during the actual existence of the enterprise / actual months of existence of the enterprise × 12

 

4. The small loans referred to in this notice refer to loans from small businesses, micro-enterprises or individual industrial and commercial households with a single household credit of less than 10 million yuan (including the principal); if there is no credit line, it refers to the single household loan contract amount and loan balance Loans below 10 million yuan (including the principal).

 

5. Financial institutions shall keep relevant tax-exempt certification materials for future reference, and separately calculate the interest income of small loans that meet the tax-exempt conditions, and apply for tax declaration to the competent tax authority in accordance with the current regulations; those without separate accounting shall not be exempt from value-added tax.

 

Financial institutions shall enjoy the preferential value-added tax policies in accordance with the law and regulations. Once any false tax report or fraud is found to obtain this preferential tax policy, they shall cease to enjoy the relevant preferential value-added tax policies.

 

Financial institutions should continue to track the loan direction to ensure that the loan funds truly flow to small enterprises, micro-enterprises and individual industrial and commercial households, and the actual users of the loans are the same as the applicants.

 

6. The Banking and Insurance Regulatory Commission organizes annual inspections on the implementation of tax exemption policies, and reports the results of inspections to the competent financial and tax authorities in a timely manner. Encourage financial institutions to issue credit loans to small and micro enterprises, reduce the intermediate links of mortgage guarantees, and effectively reduce the comprehensive financing costs of small and micro enterprises.

 

The local tax authorities should strengthen the follow-up management of the implementation of tax exemption policies, conduct special inspections of small and micro financial tax exemption policies for financial institutions, and, if any problems are found, deal with them in accordance with the current tax laws and regulations, and report the relevant conditions to the State Administration of Taxation (goods and labor Tax Division).

 

The Office of the Financial Supervisor of the Ministry of Finance in each locality shall organize a special inspection on the implementation of the tax exemption policy.

 

7. Financial institutions that issue single-family credit to small businesses, micro-enterprises, and individual industrial and commercial households are less than 1 million yuan (including the principal), or there is no credit limit, the single-family loan contract amount and the loan balance is less than 1 million yuan (including the principal) Interest income from loans can continue to be exempt from value-added tax in accordance with the “Notice of the State Administration of Taxation of the Ministry of Finance on Tax Policies Related to Supporting Financing of Small and Micro Enterprises” (Caishui [2017] No. 77).

 

Ministry of Finance and State Administration of Taxation

 

September 5, 2018