Tax Policy On Rural Finance

In order to speed up the development of rural finance and solve the problem of farmers' loans, the Ministry of Finance and the State Administration of Taxation jointly issued the circular on rural finance related tax policies recently.

In the future, financial institutions will be exempted from business tax for their interest income on small loans.

This means that large financial institutions, such as Agricultural Bank of China, which specializes in rural areas, will also get the same policy in the interest income of small farmers' loans, which will help encourage large financial institutions to better serve the "three rural issues".

Industry insiders say that this is the most preferential tax policy for rural financial development in recent years.

The notice clearly stated that from January 1, 2009 to December 31, 2013, interest income from small loans to farmers in financial institutions was exempt from business tax. When interest income of small loans for financial institutions was calculated, the total income was counted by 90% according to the amount of taxable income, and the premium income earned by the insurance company for insurance business provided by the planting and aquaculture industry was reduced by 90% percentage when calculating the taxable income.

Financial institutions should separately calculate the interest income of eligible farmers for small loans.

In addition, from January 1, 2009 to December 31, 2011, the financial and insurance industries of rural cooperative banks and rural commercial banks in the counties (including county-level cities, districts, flags and counties) and the rural commercial banks were collected from the rural credit cooperatives, village banks, rural mutual cooperatives, and wholly funded banks established by banking institutions, and the income of the financial insurance industry was reduced by 3%.

Guo Tongliang, deputy general manager of Sun Sheng long small loan company in Pingyao, Shanxi, said he was very pleased to see the introduction of preferential tax policies.

He expects that the exemption of business tax will increase the company's annual cost savings by nearly one million.

This is undoubtedly a major positive for the small loan companies in the bud stage.

Before the introduction of preferential policies, small loan companies have been paying taxes in accordance with ordinary enterprises.