Preferential policies for the reduction or exemption of education surcharges and local education surcharges Overview of other tax benefits available to schools

1. Education surcharge and local education surcharge

(1) Exemption from the education surcharge and local education surcharge items

1. The scope of exemption from education surcharge and local education surcharge applies to taxpayers whose monthly sales or turnover (or quarterly sales or turnover for quarterly taxpayers) does not exceed 100,000 yuan.

Policy basis: Notice of the Ministry of Finance and the State Administration of Taxation on Expanding the Scope of Exemption for Certain Government Funds (Cai Shui [2016] No.12)

2. The construction fund for major national water conservancy projects is exempted from urban maintenance and construction tax and education surcharge.

Policy basis: Notice of the Ministry of Finance and the State Administration of Taxation on Exempting Urban Maintenance and Construction Tax and Education Surcharge from the National Major Water Conservancy Project Construction Fund (Cai Shui [2010] No.44)

(2) Reduction of the education surcharge and local education surcharge items

From January 1, 2023 to December 31,2027, small-scale VAT taxpayers, small and micro-profit enterprises, and individual businesses will be eligible for a 50% reduction in education surcharge and local education surcharge.

Policy basis: Announcement No.12 (2023) by the Ministry of Finance and the State Taxation Administration on Further Supporting the Development of Small and Micro Enterprises and Individual Businesses through Tax and Fee Policies

(3) Deduction of education surcharge and local education surcharge items

1. For taxpayers eligible for VAT carryover refund, the refunded VAT amount may be deducted from the tax calculation basis of urban maintenance and construction tax, education surcharge, and local education surcharge.

Policy basis: Notice on Policies for VAT End-of-Period Credit Refund, Urban Maintenance and Construction Tax, Education Surcharge, and Local Education Surcharge (Cai Shui [2018] No.80)

2. From January 1, 2023 to December 31,2027, self-employed veterans engaged in individual business operations may enjoy a tax deduction system. Starting from the month of business registration, their annual tax liability for the following three years (36 months) will be reduced by up to 20,000 yuan per household. The deduction applies sequentially to the following taxes: Value-Added Tax (VAT), Urban Maintenance and Construction Tax, Education Surcharge, Local Education Surcharge, and Individual Income Tax. The maximum deduction amount may be increased by 20%.

Enterprises that hire self-employed veterans by signing a labor contract of one year or longer and legally paying social insurance premiums shall, starting from the month of contract signing and social insurance payment, enjoy a three-year fixed quota deduction for value-added tax, urban maintenance and construction tax, education surcharge, local education surcharge, and corporate income tax based on the actual number of hires. The quota standard is 6,000 yuan per person per year, with a maximum increase of 50%.

Policy basis: Announcement No.14 (2023) jointly issued by the Ministry of Finance, State Taxation Administration, and Ministry of Veterans Affairs on Tax Incentives for Self-Employed Veterans' Entrepreneurship and Employment

3. From January 1, 2023 to December 31,2027, individuals who have been lifted out of poverty (including those under monitoring to prevent relapse into poverty, hereinafter the same), or those holding either the Employment and Entrepreneurship Certificate (marked with "self-employment tax policy" or "self-employment tax policy within the graduation year") or the Employment and Unemployment Registration Certificate (marked with "self-employment tax policy"), engaged in individual business operations, shall enjoy a tax deduction limit of 20,000 yuan per household annually. This deduction applies to the following taxes within three years (36 months, hereinafter the same) starting from the month of individual business registration: value-added tax, urban maintenance and construction tax, education surcharge, local education surcharge, and individual income tax. The limit may be increased by up to 20%, and provincial, autonomous regional, and municipal governments may determine specific limits within this range based on local conditions.

Policy basis: Announcement No.15 (2023) jointly issued by the Ministry of Finance, State Taxation Administration, Ministry of Human Resources and Social Security, and Ministry of Agriculture and Rural Affairs on Further Supporting Tax Policies for Key Groups' Entrepreneurship and Employment

4. From January 1, 2023 to December 31,2027, enterprises that hire individuals lifted out of poverty, or those who have been registered as unemployed for over six months at public employment service agencies under the human resources and social security department and hold an "Employment and Entrepreneurship Certificate" or "Employment and Unemployment Registration Certificate" (marked with "Enterprise Tax Incentive Policy"), and sign a labor contract of one year or longer with them while legally paying social insurance premiums, will qualify for a three-year fixed-amount tax reduction on value-added tax, urban maintenance and construction tax, education surcharge, local education surcharge, and corporate income tax. The reduction amount is 6,000 yuan per person annually, with a maximum increase of 30%. Provincial, autonomous regional, and municipal governments may determine specific reduction standards within this range based on local conditions. The tax basis for urban maintenance and construction tax, education surcharge, and local education surcharge is the value-added tax payable before enjoying this preferential policy.

The enterprises mentioned in the announcement refer to those that are VAT taxpayers or corporate income tax payers.

Policy basis: Announcement No.15 (2023) jointly issued by the Ministry of Finance, State Taxation Administration, Ministry of Human Resources and Social Security, and Ministry of Agriculture and Rural Affairs on Further Supporting Tax Policies for Key Groups' Entrepreneurship and Employment

II. Overview of Tax and Fee Incentives for Schools

(1) Items exempt from value-added tax (VAT)

1. Nursery and kindergarten provide care and education services

2. Educational services provided by schools offering academic programs

3. All income generated by government-run higher, secondary, and elementary schools (excluding affiliated units) engaged in academic education, as well as by institutions offering advanced or training courses, shall be owned by the respective schools.

4. Enterprises established by government-run vocational schools primarily provide internship facilities for students, with the school funding and operating them independently. The school retains full ownership of the business income generated from activities classified as "modern services" (excluding financial leasing, advertising, and other modern services) and "life services" (excluding cultural/sports services, other daily services, and saunas/oxygen bars) under the "Sales Services, Intangible Assets, or Real Estate Notes" category.

Policy basis: Notice of the Ministry of Finance and the State Administration of Taxation on Fully Expanding the Pilot Program for Replacing Business Tax with Value-Added Tax (Cai Shui [2016] No.36)

5. Non-degree education services-General taxpayers providing such services may opt for the simplified tax calculation method, with the tax payable calculated at a 3% rate.

Policy basis: Notice of the Ministry of Finance and the State Administration of Taxation on Further Clarifying Policies for the Full Implementation of the Business Tax to VAT Reform Pilot Program, Including Reinsurance, Real Estate Leasing, and Non-degree Education (Cai Shui [2016] No.68)

(2) Items exempt from business tax, and items eligible for income tax reduction or exemption according to regulations

1. Income earned by schools providing academic education services is exempt from business tax.

　　2. Income earned by students through work-study programs is exempt from business tax.

　　3. Income derived from technology development, technology transfer, and related technical consulting and services provided by the school shall be exempt from business tax.

　　4. Income earned from providing childcare services to nurseries and kindergartens is exempt from business tax.

5. Individual income tax is exempt on interest earned from educational savings deposits. Scholarships in education awarded by provincial governments, ministries of the State Council, military units at or above the army level of the People's Liberation Army, as well as foreign and international organizations, are also exempt from personal income tax. When higher education institutions reward individuals with shares or equity ratios for the commercialization of job-related scientific achievements, recipients are temporarily exempt from personal income tax upon receiving such shares or ratios. However, they must pay personal income tax when receiving dividends or transferring shares or equity ratios.

Policy basis: Notice of the Ministry of Finance and the State Administration of Taxation on Education Tax Policy (Cai Shui [2004] No.39)

(3) Projects exempt from property tax and urban land use tax

The property tax and urban land use tax shall be exempted for the real estate and land used by the state to allocate funds for public undertakings and by enterprises to run schools, nurseries and kindergartens.

Policy basis: Notice of the Ministry of Finance and the State Administration of Taxation on Education Tax Policy (Cai Shui [2004] No.39)

(4) Projects exempt from the Cultivated Land Occupation Tax and the Agricultural Special Products Tax

　　1. Approved requisitioned farmland for schools and kindergartens is exempt from farmland occupation tax. The tax exemption applies to: teaching buildings, laboratories, playgrounds, libraries, offices, and campus dining facilities (including staff canteens and dormitories) of full-time primary, secondary, and tertiary institutions (including those operated by government departments or enterprises). Farmland occupied by non-agricultural operations is not eligible for exemption. Night schools, study programs, training centers, and correspondence schools are excluded from the exemption.

2. Land used for scientific experiments in agricultural colleges and universities is exempted from agricultural tax. The income from agricultural specialties obtained during the experiments is exempted from agricultural specialty tax.

Policy basis: Notice of the Ministry of Finance and the State Administration of Taxation on Education Tax Policy (Cai Shui [2004] No.39)

(v) Regarding the provisions on tariff items

　　1. Donations from overseas donors that are directly used for educational purposes in vocational schools, high schools, middle schools, primary schools, and kindergartens—such as teaching instruments, books, materials, and general learning supplies—shall be exempt from import tariffs and value-added tax (VAT). These donations exclude the 20 categories of goods explicitly prohibited from import tax exemptions by the state. Other related matters shall be handled in accordance with the Interim Measures for the Exemption of Import Taxes on Poverty Alleviation and Charitable Donations of Materials approved by the State Council.

　　2. For full-time higher education institutions with associate degrees or above accredited by the Ministry of Education, and other non-profit institutions approved by the Ministry of Finance in conjunction with relevant State Council departments, the import of scientific research and teaching supplies that cannot be domestically produced within a reasonable quantity, when directly used for research or teaching purposes, shall be exempt from import tariffs, import VAT, and consumption tax (excluding 20 categories of goods explicitly prohibited from tax exemptions by the state). The scope of such supplies and related regulations shall be implemented in accordance with the "Interim Provisions on Exemption of Import Taxes for Scientific Research and Teaching Supplies" approved by the State Council.

Policy basis: Notice of the Ministry of Finance and the State Administration of Taxation on Education Tax Policy (Cai Shui [2004] No.39)

(vi) Provisions regarding the Cultivated Land Tax project

1. Tax-exempt schools include universities, middle schools, primary schools, vocational education institutions, special education schools approved by the education administrative departments of people's governments at or above the county level, and technical colleges approved by the people's governments at the provincial level or their human resources and social security administrative departments.

Policy basis: Implementation Measures of the Cultivated Land Occupation Tax Law of the People's Republic of China (Announcement No.81 [2019] jointly issued by the Ministry of Finance, State Taxation Administration, Ministry of Natural Resources, Ministry of Agriculture and Rural Affairs, and Ministry of Ecology and Environment)

2. Tax-exempt kindergartens are specifically limited to those approved by the education administrative departments of county-level or higher people's governments, which are dedicated to childcare and education.

Policy basis: Implementation Measures of the Cultivated Land Occupation Tax Law of the People's Republic of China (Announcement No.81 [2019] jointly issued by the Ministry of Finance, State Taxation Administration, Ministry of Natural Resources, Ministry of Agriculture and Rural Affairs, and Ministry of Ecology and Environment)

3. Military facilities, schools, kindergartens, social welfare institutions and medical institutions that occupy cultivated land are exempted from the cultivated land occupation tax.

The land occupation tax on railway lines, highway lines, airport runways, aprons, ports, waterways and water conservancy projects shall be levied at a reduced rate of 2 yuan per square meter.

Rural residents who occupy cultivated land to build self-used houses within the prescribed land use standards shall pay the cultivated land occupation tax at half of the applicable local tax rate. For rural residents who are approved to relocate, the part of the cultivated land occupied by newly built self-used houses that does not exceed the original homestead area shall be exempted from the cultivated land occupation tax.

The rural martyrs' families, the families of the soldiers who died in the line of duty, the disabled soldiers and the rural residents who meet the conditions of the rural minimum living allowance are exempted from the farmland occupation tax when they build their own houses within the prescribed land use standards.

In light of the needs of national economic and social development, the State Council may prescribe other circumstances under which the tax on the occupation of cultivated land shall be exempted or reduced, and report them to the Standing Committee of the National People's Congress for the record.

Policy basis: The Law of the People's Republic of China on Cultivated Land Occupation Tax

(vii) Regarding the relevant provisions on deed tax

1. The deed tax shall be exempted under any of the following circumstances:

　　State organs, public institutions, social organizations, and military units acquire land and property rights for use in offices, teaching, medical services, scientific research, and military facilities;

　　Non-profit institutions such as schools, medical facilities, and social welfare organizations are allocated land and property rights for office use, teaching, medical services, scientific research, elderly care, and social assistance.

Policy basis: The Contract Tax Law of the People's Republic of China

2. Specific circumstances regarding tax exemptions

Non-profit institutions eligible for property tax exemptions include schools, medical institutions, and social welfare organizations, specifically those legally registered as public institutions, social groups, foundations, or social service organizations. Schools are defined as: universities, secondary schools, primary schools, and kindergartens approved by county-level or higher governments or their education authorities; vocational schools, special education schools, and specialized schools offering degree programs; and technical colleges approved by provincial governments or their human resources and social security departments.

Policy basis: Announcement No.23 (2021) by the Ministry of Finance and the State Taxation Administration on Implementation Guidelines for the Deed Tax Law