2021 China tax policy review and 2022 outlook - Embracing uncertainties, striving for flourishing

March 2022

The “China Tax Policy Review and Outlook” is a series of annual publications designed by PwC’s China National Tax Policy Services to review key tax policy developments in China and discuss the trends as well as implications on Chinese enterprises from a forward-looking perspective. This “2021 China Tax Policy Review and 2022 Outlook” is the 7th issue in the series.

As COVID-19 vaccines became more widely accessible, the economy in developed countries were gradually recovered from the pandemic in 2021. The US led global economic recovery with a strong rebound in the first half of the year. China plays an important role in the global economy. Its GDP has exceeded RMB 100 trillion for the second consecutive year in 2021, representing a growth rate of 8.1%. China attributes its sustained economic recovery to effective COVID-19 countermeasures, a steady rise in foreign investment and trade and more sustainable fiscal policies which enhance quality and efficiency.

This issue of “2021 China Tax Policy Review and 2022 Outlook” includes the following contents:

• Improvement of regional economic development-related regulations, including the release of “General Plan for the Hainan Free Trade Port”, the elevation of regional legislative power in Pudong of Shanghai, and establishment of the four strategic position of the cooperation zone in Hengqin Guangdong-Macao Deep Cooperation Zone.
• Targeted tax administration, including enhancing supervision on key industries and taxpayers, putting more efforts in promoting inclusive and prudent tax enforcement and optimising tax services, and creating a favourable tax environment tempering justice with mercy.
• Tax and fee cuts policies including value-added tax (“VAT”), corporate income tax (“CIT”), deed tax and land appreciation tax (“LAT”), etc.
• Tax policies that continue to protect innovation and entrepreneurship, technology research and development.
• China's tax measures for the special circumstances of the COVID-19 pandemic, participation in international tax rule-making, management of advance pricing arrangements, implementation of RCEP and other topics.
• 2022 outlook.

Due to countries' mixed performance in curbing COVID-19, the pandemic will linger into 2022. Even in an environment full of variables, tax reform will not stop. In 2022, the Two-pillar solution initiated by the Inclusive Framework on BEPS will make significant progress, laying the groundwork for its official implementation in 2023. In this new year, China will “prioritise stability while pursuing economic progress”, and China’s fiscal and tax authorities will also forge ahead with fiscal and tax reforms according to the “14th Five-Year Plan” on the premise that the economy maintains stable growth.