Case Description

On March 28, 2022, Shanghai implemented closure and control in batches along the Huangpu River. Although many residential areas have been transformed from closed control areas to control areas or even prevention areas since April, the Shanghai Municipal Government has so far only approved 1854 enterprises to resume work, and the resumption rate of these enterprises that have resumed work is extremely low. With no or very little income, companies need to worry about the payment of various expenses such as rent, wages, and social security. Many companies have run out of cash.

Lawyer Analysis

On March 28, 2022, the Shanghai Municipal Government reviewed and approved the "Several Policies and Measures for Shanghai to Fight the Epidemic and Help Enterprises Promote Development" in order to combat the epidemic and help enterprises promote development. The main highlights of the policy measures are as follows:

On the basis of the current effective VAT retention, offset, and refund policies issued by the Ministry of Finance and the State Administration of Taxation, further expand the scope of application of VAT retention, offset, and refund. For small and micro enterprises and individual industrial and commercial households that pay taxes according to the general tax calculation method, the stock tax allowance will be refunded in full before the end of June 2022, and the incremental tax allowance will be refunded in full on a monthly basis starting from April 1, 2022. "For enterprises in industries such as manufacturing, scientific research, and technical services, electricity, heat, gas, and water production and supply, software, and information technology services, ecological protection, and environmental governance, transportation, warehousing, and postal services listed in the National Economic Industry Classification, the amount of inventory tax credits will be fully refunded by the end of 2022, and the amount of incremental tax credits will be fully refunded on a monthly basis starting from April 1, 2022.".

2. Periodically exempt small-scale taxpayers from value-added tax; Corporate income tax will be levied on small low-profit enterprises with an annual taxable income exceeding 1 million yuan but not exceeding 3 million yuan by half; Increase the proportion of R&D expenses added and deducted by technology based small and medium-sized enterprises to 100%; Increase the pre tax deduction of equipment and appliances for small and medium-sized enterprises.

3. The scope of application of the "six taxes and two fees" reduction and exemption policies, such as resource tax, urban maintenance and construction tax, real estate tax, urban land use tax, stamp tax (excluding securities transaction stamp tax), cultivated land occupation tax, education surcharge, and local education surcharge, will be extended to small low-profit enterprises and individual businesses, and will be implemented according to the top level within the range of reduction and exemption specified by the state.
4. In 2022, the prepayment of value-added tax by air and railway transportation enterprises was suspended, and value-added tax on public transportation services such as ferry, bus passenger transport, subway, urban light rail, taxi, long-distance passenger transport, and shuttle bus was exempted.

"If it is difficult to pay taxes on schedule due to the impact of the epidemic, and if the conditions for deferred tax payment are met, an extension of tax payment shall be granted in accordance with the law, with a maximum period of no more than 3 months.". Taxpayers who fail to report on schedule due to the epidemic are exempt from tax administrative penalties.

"Small and micro enterprises and self-employed businesses that rent state-owned houses and engage in production and business activities will be exempted from 3 months of rent in 2022. If they are listed as a street or town administrative area where the epidemic is at high risk in 2022, or if the implementation of epidemic prevention requirements seriously affects their business activities, they will be exempted from 3 months of rent, with a total of 6 months of rent exempted for the whole year.".

7. Entrepreneurship organizations and individuals that are significantly affected by the epidemic can apply to the handling bank for an extension of the business guarantee loan for repayment, which in principle does not exceed one year, and can continue to enjoy financial discount support.

8. The funds paid by the labor union of small and micro enterprises shall be fully refunded.

For qualified travel agencies, the proportion of temporary refunds of travel service quality deposits has been raised from 80% to 90%, and a pilot project to replace insurance deposits has been launched throughout the city. Increase the support of special tourism funds, and provide loan discount support to qualified travel agencies, A-level tourist attractions, and other tourism enterprises.

These policies, to a certain extent, have eased the plight of enterprises under the COVID-19 epidemic, but they cannot fundamentally solve the problems faced by enterprises. On the one hand, enterprises need to take practical measures to save themselves. On the other hand, we also look forward to the release of more effective fiscal, tax, financial support, and other new policies to help enterprises promote development.