The distinction between small-scale taxpayers and general taxpayers pertains to value-added tax (VAT). By default, newly established companies are considered small-scale taxpayers. However, if their annual income exceeds 5 million yuan for 12 consecutive months and they maintain sound accounting practices, they may be classified as general taxpayers by the tax authorities.
Tax Rates:
· Small-scale taxpayers typically have a VAT rate of 3%.
From 2023 to 2027, under the tax incentive policy, the VAT rate is reduced to 1%, and VAT is exempted for monthly incomes below RMB 100,000.
· General taxpayers generally have a VAT rate of 13%.