Chinese authorities are stepping up support for micro, small and medium-sized enterprises as well as self-employed individuals by extending and improving a series of preferential tax and fee policies amid broader efforts to drive development of the private sector.

According to several statements jointly released by the Ministry of Finance and the State Taxation Administration on Wednesday, for MSMEs and self-employed individuals with an annual taxable income of less than 2 million yuan ($280,000), personal income tax can be halved. They can also enjoy a 1 percent favorable value-added tax rate, down from 3 percent.

Also, taxpayers with a monthly sales revenue of no more than 100,000 yuan will continue to be exempt from value-added taxes.

Lending income stemming from loan interest and guarantee fees related to such small business entities will remain free from value-added taxation. All the above-mentioned policies will be effective until the end of 2027, the statements said.

Xu Wen, a researcher at the Chinese Academy of Fiscal Sciences, said: "Most of the policies released this time are a continuation of the preferential policies that were supposed to expire at the end of this year. Extending and optimizing such policies shows the country's stronger support for MSMEs and self-employed individuals."

Li Xuhong, director of the academic committee at the Beijing National Accounting Institute, pointed out that such policies will further ease burdens facing MSMEs and self-employed individuals.

Li said a taxpayer with an annual taxable income of 5 million yuan and now enjoying a favorable value-added tax rate decline from 3 percent to 1 percent can save at least 100,000 yuan per year.

"Such efforts will greatly boost the vitality and improve operating conditions of MSMEs and self-employed individuals. It will in turn drive them to offer more jobs and promote the development of the private economy," Li added.

In China, private companies, most of which are smaller businesses, contribute nearly 50 percent of the nation's tax revenue and produce 60 percent of GDP. They also account for 70 percent of the nation's technological innovation and 80 percent of urban employment, said the Ministry of Industry and Information Technology.

In addition, the newly unveiled measures also allow the country to extend favorable taxation policies to venture capital firms and individual angel investors making investments in tech startups till the end of 2027.

Under the policies, investors that acquire stakes in tech startups at the seeding or early stage, and which remain invested for two or more years, can deduct 70 percent of their investment amount from their taxable income.