The Ministry of Finance (MOF) said the Chinese government feels the burden of the country's small firms, prompting it to lower taxes for businesses with an annual taxable income of not more than 100,000 yuan (US$16,100).

The MOF said on Wednesday that the tax discount will help the small firms, which are an integral part of the country's economy, and will further boost economic growth and employment.

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Based on the new policy, which will take effect until 31 December 2016, those small firms - classified as businesses with annual taxable income not exceeding 100,000 yuan - will be given 50 percent tax break on their annual income tax and a tax rate of 20 percent instead of 25 percent, the ministry said in a statement posted on its website.

The new policy raises the income bracket of qualified small companies from 60,000 yuan to 100,000 yuan. Small firms are facing difficulties in China especially that the country is facing an economic slowdown.

The ministry said the new policy support will not only help these small firms cope up with the complicated economic environment but will also boost employment as small companies branch out or make further investments.

Based on a recent survey, small- and medium-sized enterprises (SMEs) in China are considering heavy tax burdens and financial difficulty as major challenges in their operations.

The State Administration for Industry and Commerce (SAIC) said there were 11.7 million SMEs in the country, accounting for about 77 percent of the country's total number of businesses.

SAIC said the figure does not include businesses owned by individuals. If added into the count, China's SMEs would take around 94 percent share of the country's total number of businesses.

China has taken several measures, including tax breaks and other policies, to help small business keep up with the challenges of the economy. Since 1 August of last year, SMEs with monthly sales revenue of not more than 20,000 yuan have been exempted from VAT and other business taxes.