According to a recent policy clarification, individual businesses can claim a personal income tax reduction on their business income, but the entire tax on their business income can't simply be cut in half.

Under the current policy, individual businesses are entitled to a 50-percent reduction on the portion of annual taxable business income not exceeding 2 million yuan ($300,000). This preferential policy applies to all individual businesses, regardless of whether they use an accounts-based or assessed tax collection method, and is effective from Jan 1, 2023, through Dec 31, 2027.

The tax break can also be combined with other existing personal income tax incentives, helping reduce operating costs and ease financial pressure on individual businesses.

Eligible taxpayers do not need to file for prior approval or registration. When submitting their tax returns on time, they can claim the reduction by accurately completing the relevant sections of the individual income tax return and the tax reduction and exemption report.

The simplified procedure makes tax filing more convenient and ensures eligible businesses can benefit from incentives.