×

Tax incentives are preferential tax policies offered by the government to incentivize  or encourage a particular economic activity or to support disadvantaged business owners or individuals. From the investor’s perspective, tax incentives are legitimate tools for reasonable tax planning and cost savings. Also, it is a useful indicator of market trends and government priorities.

Since China’s reform and opening up began in the late 1970s, the country has implemented a series of preferential tax policies, in turn attracting a large number of foreign capital and foreign-invested enterprises and effectively promoted the adjustment and optimization of various industrial structures.

What Kind of Tax Incentives Does China Have?

There are multiple forms of tax incentives available to businesses in China, such as tax exemptions, tax reductions, lower tax rates, tax refunds or rebates, tax credits, etc. As it is not possible to exhaustively cover the subject in one article, we have categorized the tax incentives and focused on prominent examples.

Based on the type of tax

Currently China has 18 different types of taxes for individuals and businesses, some of whom are eligible for more incentives than others on tax obligations like corporate income tax (CIT), value-added tax (VAT), and individual income tax (IIT).

Here we take CIT as an example.

According to the latest Catalogue for Administration of Preferential CIT Policies released by the State Taxation Administration (STA) in 2018, there are in total 69 different CIT incentives that are available to enterprises. These include CIT exemption on certain type of incomes, such as dividends, bonuses, and other equity investment income between qualified resident enterprises; CIT reductions on certain incomes, such as income derived from eligible technology transfer; additional pre-tax deduction of certain expenses, such as research and development (R&D) expenses; tax credits for certain costs, such as the investment in seed-stage or start-up technology enterprises; lower CIT rates (the standard CIT rate is 25 percent) for certain types of enterprises, such as  high- tech companies or enterprises in certain regions, such as companies engaging in encouraged sectors in China’s western areas; and accelerated depreciation or one-time deduction of the value of fixed assets.

Similarly, there are preferential tax policies under VAT, IIT, and other type of taxes. Enterprises can examine if there are any tax incentives available by reviewing the taxes one by one.

Based on the size of businesses

Since smaller businesses may be at a disadvantage in competitive markets due to limited capital and human resources, the government tends to provide tax incentives to support their development and help them survive and thrive during difficult times, such as under the ongoing COVID-19 pandemic.

For example, small and low profit enterprises, as per the latest policy, can enjoy:

  • January 1, 2020 to December 31 2022: 20 percent CIT rate on 12.5 percent of the taxable income amount for the proportion of taxable income not exceeding RMB 1 million (approx. US$152,800) (i.e.,effective tax rate at 2.5 percent).
  • January 1, 2022 to December 31, 2024: 20 percent CIT rate on 25 percent of their taxable income amount for the proportion of taxable income of more  than RMB  1 million (approx. US$152,800) but not exceeding RMB 3 million (approx. US$ 458,500) (i.e., effective tax rate at 5 percent).

Here, small and low-profit enterprises refer to enterprises engaged in industries that are not prohibited or restricted by the government and reporting an annual taxable income not exceeding RMB 3 million (approx. US$458,500), number of total employees not exceeding 300 persons, and total assets not exceeding RMB 50 million (approx. US$7.7 million).

To be noted, China also provides other tax incentives to “small- and medium- sized enterprises” and “small-scale VAT taxpayers”, both of which are subject to different standards. Enterprises are suggested to carefully study the qualifications to see if they apply.

Based on sectors

China also provides sector-wise tax incentives for specific purposes, such as to guide industrial upgrade, to support the development of the sector, or to respond to the special characteristics of the sector.

For example, to bolster its semiconductor industry, China has rolled out a wide range of favorable policies for the integrated circuit (IC) and software industries. Among others, multiple preferential CIT incentives have been granted to encouraged IC production enterprises and projects based on the line width of the product and the expected operation period of the enterprises (e.g. qualifying IC production enterprises or projects that employ IC line width of no more than 28 nanometers (nm) and with an operation period of more than 15 years will be exempt from CIT for as many as 10 years.) Enterprises engaging in IC design, IC equipment, IC materials, IC packaging, and IC testing, and qualified software enterprises are also eligible for certain level of CIT incentives, starting from the first profit making year of the enterprises. In addition, preferential VAT and import duty policies are available for the IC and software industries, too.

Other sector-based tax incentives include preferential VAT incentives for the animation industry; higher advertisement and promotion expenditure cap of pretax deduction for enterprises manufacturing or selling cosmetics, enterprises manufacturing pharmaceuticals, and enterprises manufacturing beverages (excluding alcohol); preferential import tax policies for the new-type display industry; VAT exemption and preferential CIT policy for qualified enterprises in energy conservation service industry; and additional input VAT deduction for manufacturing services and the life service industry (cultural and sport services, educational and medical services, tourism and entertainment services, catering and accommodation services, daily residents’ services, etc.), etc.

Based on regions

Besides industrial and location advantages, policy s another decisive consideration when assessing the competitiveness of a region. Thus, China provides region-based tax incentives to encourage investments in certain less attractive areas or to give comparative advantages to more economic zones. One thing to be noted here is that region-based tax incentives are usually connected to the industrial ecosystem.

For example, enterprises will pay a lower CIT rate of 15 percent if they make investments   in encouraged industries in China’s western regions from January 1, 2021 to December 31, 2030. The encouraged industries here refer to those listed in the Catalogue of Industries Encouraged to Develop in the Western Region.

As for tax incentives provided in economic zones, examples include the 15 percent CIT rate for enterprises engaged in encouraged industries in Lingang New Area of the Shanghai FTZ, in Shenzhen’s Qianhai Area, in Pingtan Area of Fujian FTZ, and in Hainan Free Trade Port (FTP); each zone maintains their own respective standards and catalogues for assessing which industries qualify as encouraged industries.

Besides preferential CIT policies, other noticeable region-based tax incentives in specific regions are the IIT refund policy provided in the Guangdong-Hong Kong- Macao Greater Bay Area (GBA) and the Hainan FTP for the portion of IIT paid that exceeds 15 percent of the taxable income, although the policy details and application procedures are different in each region.

In addition, preferential VAT and import duties are implemented in certain regions.

Do foreign funded companies have equitable access to tax incentives?

Prior to 2008, under the Corporate Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprises, China actually granted more preferential tax policies to foreign invested enterprises (FIEs) in order to attract investment.

 For example, FIEs were taxed on their corporate income at a rate of 15 percent, far less than the 33 percent CIT rate for domestic companies at that time. Also, qualified FIEs can enjoy a "2+3 years tax holiday" or even “5+5 years tax holiday”, meaning that they shall be exempted from CIT in the first two or five years, respectively, and are allowed a 50 percent reduction in the following three or five years, respectively, from the year they begin to make profit.

Since 2013, with the five-year transitional period of the Corporate Income Tax Law of the People's Republic of China coming to an end, the tax policies for FIEs and domestic companies were consolidated and special preferential tax policies for FIEs were cancelled at the state level.

Now, FIEs and domestic companies can generally apply for tax incentives equally, based on their qualifications, although local governments can offer certain tax incentives at their discretion to attract foreign investment.

How to enjoy tax incentives in China?

China has simplified the procedures to enjoy tax incentives. For most preferential tax policies, taxpayers can self-assess if they are qualified to access the incentives and apply them when making the tax payment (that is, the time of pre-payment or final settlement, depending on the specific incentive) – without seeking approval from the local tax bureau.

However, this does not mean taxpayers can enjoy tax incentives at will, either. For one, taxpayers must retain relevant documents for potential inspection from the tax bureaus. Second, some of the required documents may involve a special application and approval process with relevant government bureaus, such as those for high-tech enterprises and IC and software enterprises. To gain eligibility for IIT refunds in certain regions also require taxpayers to apply to relevant tax bureaus.

Enterprises are suggested to pay close attention to the administrative measures in addition to the qualifications for enjoying tax incentives.

Income Tax Incentives for Developing Talent

IIT subsidies for overseas high-end talents and urgently needed talents

From the start of 2019 to the end of 2023, eligible overseas talents working in nine cities of Guangdong province – Guangzhou, Shenzhen, Zhuhai, Huizhou, Zhaoqing, Jiangmen, Dongguan, and Foshan – are able to apply for individual income tax (IIT) subsidies because of a talent policy for the Guangdong-Hong Kong-Macao Greater Bay Area.

The subsidies will be calculated based on the taxable individual income sub-items separately and will then be distributed on a lump-sum basis next year. Thus, the calculation formula of subsidy amount can be extended as:

The subsidy amount =∑ [(the amount of IIT paid in sub-items in nine cities in 2019 – taxable income in sub-items × 15%)]

The taxable income includes the following sub-items:

  • Comprehensive income, including:
    – Income from wages and salaries;
    – Income from labor compensation;
    – Remuneration income; and
    – Income from royalties;
  • Operating income; and
  • Subsidized income from selected talent programs or talent projects.

Overseas talents working in the above-mentioned nine cities and paying taxes as required by law in the local city are eligible for the subsidy. They may be:

  • Permanent residents of Hong Kong or Macau;
  • Hong Kong residents who came to Hong Kong through the Hong Kong entry scheme for talents, professionals, and entrepreneurs;
  • Residents of Taiwan;
  • Foreign nationalities; or
  • Overseas students and overseas Chinese who have obtained the right of long-term residence abroad.

Applicants shall also fit the definition of “high-end” and “urgently needed” talents and meet the income condition and contract condition, set out by the municipal governments.

Preferential IIT policies for talents in Hainan FTP

According to Cai Shui [2020] No.32, for high-end talents and talents in short supply working at Hainan FTP, the portion of their actual IIT burden exceeding 15 percent will be exempted.

The following types of income sourced from Hainan FTP will be eligible:

  • Comprehensive income, such as wages and salaries, remuneration for labor services, author’s remuneration, and income from royalties;
  • Operation income; and
  • Talent subsidy income recognized by Hainan Province.

Eligible Hainan talents still need to pay IIT according to China’s general IIT rate in the current year first. When the final settlement is made during March 1 to May 31 of the next year, the Hainan tax bureau will refund the portion of the IIT that exceeds 15 percent of the actual taxable income.

A list of professions that qualify as high-end talent and talent in short supply who can enjoy the aforesaid preferential policies and specific administrative measures will be formulated by Hainan Province in consultation with the MOF and the STA. various financial incentives at the provincial, municipal, district, and development zone levels

Various individual income tax incentives, subsidies, and rewards may be offered to talents working at special zones, such as Lingang New Area of Shanghai Free Trade Zone, Suzhou Industrial park, etc. Talents may consult with the local authorities or professionals to ensure whether they can be eligible to enjoy these preferential policies.

Preferential IIT policies for talents in Zhuhai Hengqin

Zhuhai Hengqin (Guangdong-Macao ICZ) plans a policy similar to the IIT incentives implemented at the nine Guangdong cities in GBA as well as in Hainan FTP. Overseas and domestic high-end talents and shortly needed talents working in the ICZ may be exempt from paying the portion of income tax that exceeds 15 percent of their taxable income. Moreover, Macao residents working in the ICZ may apply Macao’s IIT rates.

Preferential IIT policies for talents in Beijing and Shanghai

Eligible overseas high-end talents working in certain areas of Beijing will be able to enjoy preferential IIT policy, according to the State Council. The detailed implementation measures are yet to be announced.

Shanghai Lingang New Area also grants financial subsidies for foreign high-end and shortly needed talents, which can lower their effective IIT rate to 15 percent. According to some public reports, the area has started implementing the relevant IIT measures, although the detailed implementation rules are not public.

Tax Incentives Offered in Specific Sectors

CIT incentives for integrated circuit enterprises and software enterprises

On August 4, 2020, China’s State Council released the Policies of Promoting High-quality Development of Integrated Circuit Industry and Software Industry (Guo Fa [2020] No.8).

The document lays out a wide range of policies to shore up the development of the integrated circuit (IC) and software industries, applying to all companies registered in China, regardless of nationality.

Under the new policy, qualifying IC production enterprises or projects that employ integrated circuit line width of no more than 28 nanometers (nm) and have operated for more than 15 years will be exempt from CIT for as many as 10 years.

For encouraged IC manufacturing enterprises or projects with integrated circuit line width that is no more than 65 nm and operation period of over 15 years, they can enjoy CIT exemption for the first five years, and a half-rate tax deduction of the 25 percent CIT deduction (that is, 12.5 percent) in the subsequent five years.

For encouraged IC manufacturing enterprises or projects with integrated circuit line width no more than 130 nm and operation period of over 10 years, they can enjoy tax exemption for the first two years and a half-rate tax reduction (that is, 12.5 percent) in the following three years.

In addition, where an encouraged IC manufacturing enterprise that employs integrated circuit line width that is no more than 130 nanometers incurs a loss in a tax year, the enterprise is allowed to carry the loss forward to subsequent years, provided the loss carried forward does not exceed 10 years (note: for normal enterprises, the loss carried forward generally cannot exceed five years).

The abovementioned tax incentives count starting from the first profit making year for the IC enterprise, or the first business revenue collection year for the IC project.

The list of encouraged IC manufacturing enterprises or projects will be drawn up by the National Development and Reform Commission (NDRC) and the Ministry of Industry and Information Technology (MIIT), together with other relevant authorities.

For encouraged enterprises engaging in IC design, IC equipment, IC materials, IC packaging, and IC testing as well as software enterprises – they can enjoy tax exemption for the first two years and a half-rate tax reduction (12.5 percent) in the following three years, starting from the first profit making year of the enterprise.

The qualification of encouraged IC design, equipment, materials, packaging, and testing enterprises will be drawn up by the MIIT together with other relevant authorities.

Key IC enterprises and software enterprises can enjoy tax exemption for the first five years and a reduced 10 percent CIT rate in the following years, starting from the first profit making year of the enterprise. The list of key encouraged IC enterprises and software enterprises will be drawn up by the NDRC, MIIT, together with other relevant authorities.

CIT incentives for income derived from eligible environmental protection, energy saving, or water conservation projects

The income an enterprise obtains by undertaking eligible projects, such as public sewage treatment, public garbage treatment, comprehensive development and utilization of biogas, technological transformation for energy saving and reduced emissions and desalination, etc., will be exempted from CIT for the first three years as of the taxable year when the revenue arising from production or operation is first obtained, and taxed at a half rate from the fourth to the sixth year.

CIT incentives for enterprises making investments in or operating of public infrastructure projects specially supported by the state

Income obtained from projects in respect to ports, wharves, airports, railways, roads, urban public transportation, electric power, and water conservancy listed in the Catalogue of Public Infrastructure Projects Entitled to CIT Preferential Policy will be exempted from CIT for the first three years as of the taxable year when the revenue arising from production or operation is first obtained, and taxed at a half rate from the fourth to the sixth year.

CIT incentives for enterprises engaging in other sectors

  • Tax incentives for enterprises engaging in pollution control - Qualified resident enterprises engaging in pollution control can enjoy a reduced CIT rate of 15 percent, during the period between January 1, 2019 and December 31, 2021.
  • Income derived from planting of flowers, tea, and other beverage plants and spiceberries, and income derived from mariculture and inland aquaculture shall be subject to 50 percent CIT reduction.
  • Income derived from the following projects could be exempted from CIT:
    • Planting of vegetables, corn, potatoes, oil plants, beans, cotton, hemp, sugar plants, fruit, and nuts;
    • Breeding of new varieties of crops;
    • Planting of traditional Chinese medicinal herbs;
    • Cultivation and planting of woods;
    • Raising of livestock and poultry;
    • Gathering of forest products;
    • Agricultural, forestry, husbandry, and fishery service projects such as irrigation, primary processing of agricultural products, veterinarian, promotion of agricultural technology, operations, repair and maintenance of agricultural machinery etc.; and
    • Ocean fishing.

Tax Incentives to Encourage Technology Innovation

As China endeavors to shift from being a low-end mass manufacturer to a high-end producer, the government has doubled down on encouraging targeted investments in research and development (R&D) and technological innovation. The ongoing technology confrontation with the US is another factor at play, impacting a wide range of segments from access to chips and other key input technologies and products. This has resulted in China labeling its technology sector as a strategic one and for which government support has increased.

In this article, we summarize the major tax incentives to encourage technology innovation and share our experience on accessing the benefits of the preferential policies.

High and new technology enterprises (HNTEs)

HNTE treatment, which reduces a qualified taxpayer’s applicable corporate income tax (CIT) rate from the standard 25 percent to 15 percent, is one of China’s core tax incentives that encourage innovation.

Besides the lower CIT rate, starting from January 1, 2018, an additional preferential tax treatment has been granted to HNTE:

  • Losses of qualified HNTE that occur five years prior to the year in which they become qualified and have not been made up – shall be allowed to be carried forward to subsequent years to be made up, and the maximum carry-forward period is up to 10 years. For normal enterprises, the maximum carry-forward period for losses is only five years.

Upon obtaining the qualification as an HNTE, the enterprise shall enjoy the HNTE treatment starting from the year when the HNTE certificate is issued.

Qualification and criteria

To qualify for HNTE status, a company must meet all of the following criteria:

  • Be registered in China (not including Hong Kong, Macao, and Taiwan) for at least one years.
  • Owns the intellectual property (IP) right for the core technology of its key products or services (services ) through independent R&D, transfer, donation, merger and acquisition, etc.
  • The core technology of the enterprise’s key products (services) falls within the scope of the areas outlined in the Regions of Advanced Technologies Strongly Supported by the State, which covers more than 200 categories of technologies, products, and services in eight large technological areas.
  • The enterprise’s technical personnel engaging in R&D and relevant technological innovation activities constitute more than 10 percent of the total number of employees in the current year.
  • In the last three financial years (the actual operational period for newly established ones), R&D expenditure should account for a certain percentage of the enterprise’s total sales revenue in the same period:
    1. No less than five percent if the latest annual sales revenue is below RMB 50 million (inclusive, approx. US$7.7 million);
    2. No less than four percent if the latest annual sales revenue is below between RMB 50 million (approx. US$7.7 million) and RMB 200 million (inclusive, approx. US$30.8 million); and
    3.  No less than three percent if the latest annual sales income is upwards of RMB 200 million (approx. US$30.8 million).

R&D expenditure within China is not less than 60 percent of the total R&D expenses.

  • The ratio of income from high-tech related operations against total income is not lower than 60 percent in the current period.
  • The enterprise’s innovation capacity evaluation satisfies the corresponding requirements.
  • The enterprise has no record of major safety or quality incidents or serious environmental violations during the year preceding the application.

Technology-based small- and medium-sized enterprises (TSMEs)

A TSME falls under the scope of SMEs that conduct technology-based activities, which consists of scientific and technological personnel who are involved in R&D activities and obtain IP for creating high-tech products or services.

Being qualified as a TSME, the losses of the enterprise occurred five years before the year in which they become qualified and have not been made up shall be allowed to be carried forward to subsequent years to be made up, and the maximum carry-forward period is up to 10 years. Besides, local governments may treat TSMEs as HNTE candidates and provide other incentives to support their growth.

According to the 2022 Government Work Report released on March 5,2022, during the 2022 Two Sessions, the additional R&D expenses deduction ratio of TSMEs will be raised from 75 percent to 100 percent. More details are expected to be released in the coming months.

Different from the HNTE qualification, the TSME status has special requirements on enterprises’ number of total employees, annual sales revenue amount, and total assets. On the other hand, the HNTE requires that the core technology of the enterprise’s key products (or services) is specially encouraged by the state and the ratio of income from high-tech related operations against total income is not lower than 60 percent in the current period, while TSME has no such requirements. In general, it is easier to apply for the TSME status for smaller businesses.

Qualification and criteria

 A ATSE shall meet all the following requirements:

  • Be registered in China (excluding Hong Kong, Macao, and Taiwan).
  • The total number of its employees shall be no more than 500, and either its annual sales income or its total asset amount shall be no more than RMB 200 million (approx. US$30.8 million).
  • The products and services provided by it are not included in the prohibited, restricted, or eliminated categories prescribed by the State.
  • There is no occurrence of major safety or major quality accidents and serious violation of environmental law or serious dishonesty in scientific research in the previous year of filling and the present year, and it is not included in the list of enterprises with abnormal operations or the list of enterprises with serious dishonest behaviors in violations of the law.
  • Its comprehensive evaluation score is not less than 60 points in terms of the evaluation indicators for TSMEs, with the score on scientific and technical staff indicator more than 0 point.

The evaluation indicators for TSMEs, to be specific, include such categories as scientific and technical staff, R&D investment, as well as scientific and technological achievement, with a total score of 100.

Certain enterprises could be exempted from the scoring requirements, including:

  • Enterprise that holds an HNTE certificate that has not expired yet.
  • Enterprise that has won a state-level science and technology award within the past five years and ranked in the top three.
  • Enterprise that has a recognized R&D body at provincial or ministerial level or above.
  • Enterprise has taken the lead in the development of international standards, national standards, or industry standards within the past five years.

Advanced technology service enterprises (ATSEs)

In addition to HNTE and TSME, ATSE status is another core innovation tax policy in China to encourage the provision of information technology outsourcing (ITO), business process outsourcing (BPO), or knowledge process outsourcing (KPO) services to overseas entities.

Originally launched in the Suzhou Industrial Park in 2016, the ATSE incentive was rolled out nationwide in 2017, reducing the CIT rate for a qualified ATSE from the standard 25 percent to 15 percent, similar to the HNTE treatment.

Besides, ATSEs are subject to zero value added tax (VAT) rate for the provision of certain offshore services, which means they can be exempted from the corresponding VAT payment where the simple tax computation method is applicable, or they can enjoy the tax exemption, credit, and refund method where VAT general tax computation method is applicable.

Previously, the ATSEs also had the privilege to deduct employee education expenses that do not exceed eight percent of the said enterprise’s total salaries from the taxable income of the CIT, and the part exceeding eight percent could be carried forward to subsequent years. However, since January 1, 2018, this policy has been made available to all enterprises unless stipulated otherwise.

Qualification and criteria

 To be qualified as a ATSE, an enterprise must fulfill all the following requirements:

  • Be registered in China (excluding Hong Kong, Macao, and Taiwan).
  • Be engaged in one or more categories of advanced technology service businesses listed in the Scopes of Recognized Advanced Technology Service Businesses (for Trial Implementation, hereinafter, the Scope) and adopt advanced technologies or has strong research and development capabilities.
  • More than 50 percent of its staff hold a college degree or above.
  • More than 50 percent of its total revenue at the current year come from the revenue generated from the advanced technology service businesses listed in the Scope.
  • Revenue generated from offshore service outsourcing business is not less than 35 percent of total revenue at the current year.

“Revenue generated from offshore service outsourcing business” refers to the revenue generated by an enterprise from overseas entities by providing the ITO, BPO, KPO services specified in the Scope for the overseas entities by the enterprise itself or by other enterprises directly subcontracted by the enterprise under the entrustment contract signed between the enterprise and the overseas entities.

Super deduction on R&D expenditure

In an effort to encourage innovation, beyond the lower CIT rates and loss carry-forward policy introduced above, China also allows for the super deduction of the enterprise’s R&D expenses.

When calculating the CIT taxable income, while the cost is usually 100 percent deductible and the expenses, such as employee education expenses and advertising expenses, are subject to a deduction cap, the expense actually incurred by an enterprise in R&D activities enjoys the below preferential policies:

  • For manufacturing enterprises (except tobacco manufacturing), starting from January 1, 2021, if the R&D expenses do not form intangible assets and are included in the current profits and losses, on the basis of actual deduction, an additional 100 percent of such R&D expenses could be deducted from the taxable income amount; if the R&D expenses have formed intangible assets, they can be amortized before CIT at 200 percent of the actual cost of intangible assets.
  • For other enterprises (except tobacco manufacturing, lodging and catering, wholesale and retail, real estate, leasing and commercial services, and entertainment), during the period between January 1, 2018 and December 31, 2023, if the R&D expenses do not form intangible assets and are included into the current profits and losses, on the basis of actual deduction, an additional 75 percent of such R&D expenses could be deducted from the taxable income amount; if the R&D expenses have formed intangible assets, they can be amortized before CIT at 175 percent of the actual cost of intangible assets.

Manufacturing enterprises are enterprises whose main business is in the manufacturing industry and whose main business income accounts for more than 50 percent of the total income in the year of enjoying preferential treatment.

For expenses incurred in R&D activities entrusted by enterprises to external institutions or individuals within China, 80 percent of the actual amount shall be included in the entrusting party’s R&D expenses and allowed for the additional deduction, and the entrusting party shall not make further additional deduction.

For expenses incurred in R&D activities entrusted by enterprises to external institutions (exclude individuals) outside China, 80 percent of the actual expenses shall be itemized as the entrusting party’s commissioned overseas R&D expenses. The commissioned overseas R&D expenses, to the extent of two-thirds of the domestic R&D expenses, are eligible for the pre-tax additional deduction.

To be noted, R&D activities here refer to processes where an enterprise applies new science and technology knowledge creatively for the purpose of obtaining new science and technology knowledge or carried out systematic activities with specific goals continuously for substantive improvement of technologies, product (services), and processes. Non-creative activities, such as conventional upgrades of the enterprise’s products, are not regarded as eligible for the R&D super deduction policy. The State Taxation Administration also has detailed guidance on the scope of the R&D expenses.

According to the 2022 Government Work Report released on March 5 during the 2022 Two Sessions, the additional R&D expenses deduction ratio of technology-based small- and medium-sized enterprises (TSMEs) will be raised from 75 percent to 100 percent. More details are expected to be released in the coming months.

Similar to other CIT preferential policies, to enjoy the R&D expenses super deduction policy, enterprises can enjoy the incentive when making tax payment (at the time of pre-payment or final settlement) by self-evaluating if they are qualified and retain relevant documents for future potential inspection of the tax bureau for 10 years. To be noted, R&D activities entrusted to overseas institutions are subject to additional documentation requirements.

Summary

Besides the major innovation tax policies introduced above, there are other preferential tax policies to encourage the development of the tech sector, such as the tax incentives to the integrated circuit and software sector, the timelier refund of the VAT incremental credit balance to advanced manufacturing taxpayers, etc.

As such incentives can reduce the enterprise’s tax burden to a large extent, potentially qualified enterprises are suggested to carefully study the application requirements of each incentive and choose the one or more that are most preferential and suitable to their own situation. For example, for an enterprise that doesn’t own local IP rights of the key technologies representing the enterprise’s core products or services, the ATSE status is more suitable for it than the HNTE status, as the latter involves local IP requirement.

Businesses in China may find its documentation requirements and application procedures burdensome if they are not familiar with the established tax system and eligibility criteria for accessing supportive measures. Seeking professional assistance might be the best choice. To learn more about how to get the most out of China’s preferential tax policies, please contact tax@dezshira.com.

Tax Incentives Offered in Specific Regions of China

China has been introducing different tax incentive schemes in certain regions. Some regions, such as the Hainan Free Trade Port (FTP) and the Guangdong-Hong Kong-Macao Greater Bay Area (GBA), are part of the country’s economic development strategy, where tax incentives are there to help achieve ambitious development goals. Other regions are encouraged due to their lack of geographical and legacy industrial advantages and need policy support to lure investments for economic development like the vast western regions.

CIT cuts in Western China

Until December 31, 2030, enterprises set up in China’s western regions with their main businesses in encouraged industries of the specific region can enjoy a reduced corporate income tax (CIT) rate of 15 percent, according to MOF SAT NDRC Announcement [2020] No.23.

The western regions are Inner Mongolia, Ningxia, Shaanxi, Gansu, Chongqing, Sichuan, Guizhou, Guangxi, Yunnan, Qinghai, Tibet, and Xinjiang. Some underprivileged cities in other provinces – Xiangxi, Enshi, Yanbian, and Ganzhou – may also adopt the same CIT preferential policy.

To be eligible, the enterprise’s main business must fit into the encouraged category of the relevant industry catalogues. And its main business revenue must account for at least 60 percent of its total business revenue.

Xinjiang

To especially support the economic development of Xinjiang in Western China, a “2+3 years tax holiday” policy is available for enterprises setting up in Xinjiang’s underprivileged areas and a “5 years tax holiday” can be availed by those established in Kashgar and Khorgos.

From January 1, 2021 to December 31, 2030, enterprises set up in Xinjiang’s underprivileged areas whose main business is in encouraged industries can enjoy CIT exemption for the first two years (starting from the first income-generating year), and a halved CIT rate (that is, 12.5 percent) in the subsequent three years, according to Cai Shui [2021] No.27. Those set up in special economic development zones of Kashgar and Khorgos can be straightly exempt from CIT for five years (starting from the first income-generating year).

Chinese Regions Offering Reduced CIT Rate of 15% for Encouraged Businesses

CIT rate

Region

 

Effective period

15%

Western regions

 

2021.1.1-2030.12.31

Hainan FTP

 

2020.1.1-2024.12.31 (“positive list” management phase)

2025-2035 (“negative list” management phase)

Special economic zones

Shanghai Lingang

2020.1.1 (no specific expiration date)

Shenzhen Qianhai

2021.1.1-2025.12.31

Fujian Pingtan

2021.1.1-2025.12.31

Zhuhai Hengqin

To be announced

Tax incentives in Hainan FTP

China is currently putting great effort to transform Hainan island into a world-leading free trade port. To attract businesses and talents, the government has introduced a series of innovative tax relief measures. Businesses may find them very attractive when contemplating their Hainan operations.

CIT incentives in Hainan FTP

Enterprises registered in Hainan Free Trade Port get the chance to enjoy the following CIT relaxations, according to Cai Shui [2020] No.31.

CIT rate reduction

Enterprises that (a) are registered in Hainan FTP, (b) have “substantive operations” in Hainan, and (c) with their main business in the encouraged industries in Hainan are entitled to CIT at a reduced rate of 15 percent from January 1, 2020 to December 31, 2024. Likewise, to qualify, the enterprise’s main business must be in the encouraged industries of Hainan, and the income from the enterprise’s main business must constitute 60 percent or more of its total income.

What’s more, during the period from 2025 to 2035, the applicable scope of the lowered CIT rate of 15 percent will be expanded to benefit all Hainan enterprises (only except those in a “negative list” sector), according to the Overall Plan for the Construction of Hainan FTP released by the State Council.

CIT exemption on overseas direct investment income

Enterprises of tourism, modern service, and high-tech sectors registered in Hainan FTP are exempt from paying CIT on income from new overseas direct investment between January 1, 2020 and December 31, 2024.

The tax exemption applies to (a) income from operating profits from newly established overseas branches and (b) dividend income that is a result of new direct investment obtained from overseas subsidiaries in which the Hainan enterprise holds a 20 percent or more equity. Plus, to enjoy the tax exemption, the foreign jurisdiction, where the overseas branch is located or investment is made, must impose a statutory income tax of five percent or more.

Accelerated tax deductions for eligible capital expenditures

Furthermore, Hainan-registered enterprises are allowed to accelerate the pre-tax deduction of the cost of fixed assets (excluding building) or intangible assets that are acquired between January 1, 2020 and December 31, 2024.

  • For assets with a unit value no more than RMB 5 million (approx. US$0.77 million), a one-off pre-tax deduction is allowed; and
  • For assets with a unit value of more than RMB 5 million (approx. US$0.77 million), accelerated depreciation or amortization is allowed.

This tax treatment in Hainan FTP is quite similar to that provided in Cai Shui [2018] No.54. However, Hainan’s accelerated depreciation/ amortization regime for eligible capital expenditure is more relaxed because the Cai Shui [2018] No.54 (which is applicable nationwide) does not cover intangible assets, but Hainan’s policy covers fixed assets (including those self-constructed and self-developed) and intangible assets. Plus, Cai Shui [2018] No.54 contains more restrictions on fixed assets with a unit value of more than RMB 5 million (approx. US$0.77 million).

CIT and IIT reduction for venture capital enterprises

According to the 2021 Guidelines for Venture Capital in Hainan FTP, for venture capital enterprises that are established in Hainan and meet the requirements:

  • 70 percent of the investment in small and medium-sized high-tech enterprises and start-up technology enterprises can be deducted from its taxable income; and
  • A reduced CIT rate of 15 percent can be enjoyed for income from industries encouraged by Hainan FTP.

Moreover, qualified employees of venture capital enterprises may be exempt from paying IIT on the portion that exceeds 15 percent of their taxable incomes gained in Hainan FTP, including comprehensive incomes, business incomes, and talent subsidy income recognized by Hainan Province.

IIT incentives

According to Cai Shui [2020] No.32, qualified high-end and urgently needed talents working at Hainan FTP can enjoy a partial individual income tax (IIT) exemption. That is, the portion of the IIT exceeding 15 percent of their taxable income can be exempt during the period from January 1, 2020 to December 31, 2024.

This talent policy is modeled after the one implemented in Guangdong-Hong Kong-Macao Greater Bay Area (GBA).

However, Hainan even has more IIT relaxation after 2024. From 2025 to 2035, Hainan FTP will limit the IIT brackets on comprehensive income and business income to 3%, 10%, and 15% percent (the normal tax brackets are: 3%, 10%, 20%, 25%, 30%, 35%, and 45% for comprehensive income; and 5%, 10%, 20%, 30%, and 35% for business income) for certain individuals residing in Hainan. To qualify, the individual must reside in Hainan for no less than 183 days a year.

Import duty exemption

Encouraged industrial enterprises producing goods originating from Hainan that do not contain imported materials or contain imported materials but with added value exceeding 30 percent after processing of imported intermediary products in Hainan are exempt from import tariffs when entering the rest of China.

Tax incentives in Guangdong-Hong Kong-Macao GBA

IIT incentives

In GBA, foreign high-end talents and urgently needed talents working at the nine mainland cities – namely GuangzhouShenzhen, Zhuhai, Foshan, Huizhou, Dongguan, Zhongshan, Jiangmen, and Zhaoqing – can apply for a financial subsidy to lower their IIT burdens from January 1, 2019 to December 31, 2023. The subsidy amounts to the portion of the IIT paid by the qualified talent that exceeds 15 percent of one’s taxable income, according to Cai Shui [2019] No.31.

IIT Incentives – Hainan vs GBA

Preferential IIT Rates in Specific Regions of China

Area

Hainan FTP

Nine GBA cities

IIT rate

Comprehensive income, business income, and talent subsidy income recognized by the Hainan government

Comprehensive income, business income, and subsidy income from selected talent programs and talent projects

15% (2020.1.1-2024.12.31)

15% (2019.1.1-2023.12.31)

3%, 10%, 15% (2025-2035)

-

Scope of eligible talents

Before 2025: eligible foreign and domestic high-end talents and talents in short supply.

Before 2035: eligible individuals who reside in Hainan FTP for more than 183 days in a tax year.

Eligible overseas talents high-end talents and talents in short supply.

Application process

No need to apply. The portion of the IIT that exceeds 15% of the taxable income paid last year will be refunded to the talent after annual final settlement of IIT.

Need to apply during a specific period each year. The portion of the IIT that exceeds 15% of the taxable income paid last year will be returned to the talent as a subsidy after the application is made.

* In addition to Hainan FTP and GBA, Shanghai Lingang New Area, Guangdong-Macao ICZ (Zhuhai Hengqin), and certain areas in

Beijing also implement or will implement similar IIT incentives. Detailed implementation rules are yet to be announced.

Basically, the IIT incentives in Hainan FTP and in GBA both aim to lower the actual income tax burden of qualified talents to 15 percent of their taxable income. Besides, in both policies, taxable income refers to the individual’s comprehensive income, business income, and recognized subsidy income (investment or asset transfer income is not covered).

However, there are also some differences. First, Hainan’s IIT policy applies to both foreign and domestic talents, while GBA’s IIT incentive is only applicable to foreign talents (including residents of Hong Kong, Macao, and Taiwan).

Second, eligibility criteria for Hainan’s IIT incentives considers social security contributions, proof of labor relationship, minimum annual income (for “high-end talents”), and the talent catalogue (for “talents in short supply”). However, in the GBA, qualification criteria vary from city to city. In addition to the basic requirements, foreign talents also need to satisfy additional criteria in their city (such as the city’s catalogues of high-end talents and talents in short supply, the minimum working days/annual income requirements, etc.).

Further, to enjoy the IIT relief, GBA talents need to file applications during a specific period each year. The excess portion of the IIT paid last year will be returned to the talent this year as a subsidy after the application is successful. However, Hainan provides a more streamlined process. Overpaid tax can be refunded to the talent immediately after the talent completes the annual final settlement of IIT

Notably, some other special economic zones, including Lingang New Area of Shanghai Free Trade Zone (FTZ), Guangdong-Macao Intensive Cooperation Zone (also known as Zhuhai Hengqin area), and Hunan FTZ Changsha Area adopt similar IIT policies.

VAT incentives

To support import and export business, the GBA has introduced value-added tax (VAT) exemption policy for some insurance companies as well as tax refund policy at port of departure.

VAT exemption for insurance enterprises

From October 1, 2020 to December 31, 2023, income of insurance premium for international shipping derived by insurance enterprises registered in Guangzhou from enterprises registered in Nansha Area of Guangdong FTZ will be exempt from VAT, according to Cai Shui [2020] No.48.

Export tax rebates

From October 1, 2020, containerized cargos to be shipped abroad from the designated 37 ports of shipment and passing through Nansha Bonded Port of Guangzhou and Qianhai Bonded Port of Shenzhen (the place of departure) by qualified export enterprises with qualified transportation enterprises as the carriers, will be eligible for the export tax rebate policy at the port of the shipment.

Tax incentives in Shanghai Lingang New Area

Some of China’s special economic zones like free trade zones (FTZs) also offer competitive tax incentives for companies.

CIT incentives

Starting January 1, 2020, enterprises registered in Lingang New Area of Shanghai FTZ may be eligible for a lowered CIT rate of 15 percent for five years since its date of establishment, according to Cai Shui [2020] No.38.

To qualify, the enterprise’s main business must be in four key industries – integrated circuits (IC), artificial intelligence (AI), biomedicine, and civil aviation. And it must engage in substantive production and R&D activities in a sector listed in the Catalogue of Key Fields and Core Links of Lingang New Area.

IIT incentives

Lingang also grants financial subsidies for foreign high-end and shortly needed talents, which can lower their effective IIT rate to 15 percent. According to some public reports, the area has started implementing the relevant IIT measures, although the detailed implementation rules are not public.

VAT incentives

From January 1, 2021 to December 31, 2024, enterprises registered in Yangshan Special Comprehensive Bonded Zone (CBZ) of Lingang New Area are exempt from VAT on income derived from providing transportation services, handling services, and warehouse services within the zone, according to Cai Shui [2021] No.3.

Tax incentives in Shenzhen Qianhai

CIT incentives

According to Cai Shui [2021] No.30, from January 1, 2021 to December 31, 2025, qualified enterprises engaged in encouraged business activities in Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone are able to enjoy a reduced CIT rate of 15 percent.

Shenzhen Qianhai encourages businesses in 30 sectors under five broad industry categories – modern logistics, information services, technology services, cultural and creative industries, and commercial services.

Tax Incentives in Fujian Pingtan

CIT incentives

According to Cai Shui [2021] No.29, from January 1, 2021 to December 31, 2025, qualified enterprises engaged in encouraged business activities in Pingtan Comprehensive Experiment Zone of Fujian FTZ are entitled to the reduced 15 percent CIT rate.

Fujian Pingtan currently encourages 146 Industry sectors under five categories – high-tech, consumer services, agricultural and marine industry, ecological and environmental protection, infrastructure management, and tourism.

Tax Incentives in Zhuhai Hengqin (Guangdong-Macao ICZ)

In September, the State Council rolled out a masterplan for the construction of Guangdong-Macao Intensive Cooperation Zone (ICZ), which contains a series of favorable tax policies. Businesses may find many of them similar to those implemented at Hainan FTP.

CIT incentives

Eligible enterprises registered in the Cooperation Zone will be entitled to a reduced CIT rate of 15 percent on their business income. Also, CIT will be exempt on the newly added earnings from overseas direct investment into the tourism, modern services, and high technology businesses set up in the Cooperation Zone.

Further, capital expenditure of businesses that meets the criteria will be allowed a one-off deduction before tax for the taxation period in which the expenditure occurred or accelerated depreciation and amortization.

IIT incentives

The ICZ also plans a policy similar to the IIT incentives implemented at the nine Guangdong cities in GBA as well as in Hainan FTP.

Overseas and domestic high-end talents and shortly needed talents working in the ICZ may be exempt from paying the portion of income tax that exceeds 15 percent of their taxable income. Moreover, Macao residents working in the CIZ may apply Macao’s IIT rates.

Beijing IIT incentives

Eligible overseas high-end talents working in certain areas of Beijing will be able to enjoy preferential IIT policy, according to the State Council. The detailed implementation measures are yet to be announced.

Tax incentives in Beijing Zhongguancun

CIT exemption on income from qualified technology transfer

Resident enterprises registered in Beijing Zhongguancun National Independent Innovation Demonstration Zone are exempt from CIT on income derived from qualified technology transfer not exceeding RMB 20 million (approx. US$3.1 million), according to Cai Shui [2020] No.61. In addition, CIT on income from qualified technology transfer exceeding RMB 20 million (approx. US$3.1 million) can be halved.

This tax treatment shares similarities with the STA Announcement [2015] No.82, which allows resident enterprises nationwide to enjoy CIT cuts on income from qualified technology transfer. However, the STA Announcement [2015] No.82 has a smaller tax-free limit of RMB 5 million (approx. US$0.77 million) and stricter definition of qualified technology transfer.

CIT reduction for venture capital enterprises

Furthermore, according to Cai Shui [2020] No.63, effective from January 1, 2020, for qualified corporate venture capital enterprises (CVCE) in the Demonstration Zone:

  • If the gains on the transfer of equity, which has been held for not less than three years, exceeds 50 percent of the total gains on the transfer of equity in a given tax year, a 50 percent exemption for CIT based on the shareholding ratio of individual shareholders at year-end is allowed (CIT Exemption = Shareholding ratio of individual shareholders at year-end x CIT liability for year ÷ 2); and
  • If the gains on the transfer of equity, which has been held for not less than five years, exceeds 50 percent of the total gains on the transfer of equity that year, a 100 percent exemption for CIT based on the shareholding ratio of individual shareholders at year-end is allowed (CIT Exemption = Shareholding ratio of individual shareholders at year-end x CIT liability for year).

China’s special economic zones are all over the country, each with special support measures for businesses. Due to the limited space of this article, we cannot enumerate them all here. You are welcome to contact our business intelligence consultants and tax experts at China@dezshira.com for detailed business and policy information in a specific region.

Tax Incentives for Small Businesses

CIT incentives for small and low-profit enterprises

China has recently enhanced its inclusive tax cut policy for small and low-profit enterprises (SLPEs). SLPEs refer to enterprises engaged in non-restrictive and non-prohibited businesses that meet the following three conditions:

  • Annual taxable income not exceeding RMB 3 million (approx. US$458,500);
  • Number of employees not exceeding 300; and
  • Total asset value not exceeding RMB 50 million (approx. US$7.7 million).

All types of SLPEs in China are able to enjoy a reduced corporate income tax (CIT) rate of 20 percent in combination with a reduction of their tax base.

Specifically, SLPEs are subject to:

  • 20 percent CIT rate on 12.5 percent of the taxable income amount for the portion of taxable income not exceeding RMB 1 million (approx. US$152,800) (effective from Jan. 1, 2021-Dec. 31, 2022); and
  • 20 percent CIT rate on 25 percent of their taxable income amount for the portion of taxable income more than RMB 1 million but not exceeding RMB 3 million (effective from Jan. 1, 2022-Dec. 31, 2024)

As a result, for an SLPE’s taxable income amount up to RMB 1 million, an effective 2.5 percent CIT rate applies; for the portion of taxable income between RMB 1 million and RMB 3 million, an effective 10 percent CIT rate applies.

Because the SLPE evaluation is carried out at the entity level (instead of at the group level), small subsidiaries of foreign multinational enterprises (MNEs) in China can also benefit from these CIT cuts.

Corporate Income Tax Cuts for Small Low-Profit Enterprises

CIT rate

Tax base (annual taxable income amount = X)

Effective CIT rate

Effective period

20%

X <= RMB 1 million

25%

5%

2019.1.1-2021.1.1

12.5%

2.5%

2021.1.1-2022.12.31

RMB 1 million < X <= RMB 3 million

50%

10%

2019.1.1-2021.12.31

VAT incentives for small-scale taxpayers

China offers value-added tax (VAT) benefits to small-scale taxpayers, including reduced VAT levy rate and increased VAT threshold.

Here, small-scale taxpayers normally refer to taxpayers whose annual VAT taxable sales does not exceed RMB 5 million (approx. US$0.77 million).

However, unincorporated entities, enterprises, and individually owned businesses that do not often incur VAT taxable transactions, even if their annual taxable sales exceed the stipulated standard, can choose to be treated as small-scale taxpayers (instead of being registered as general taxpayers).

Reduced VAT Rates for Small-Scale Taxpayers

Small-scale taxpayers

VAT rate

Effective period

Inside Hubei

0%

2020.3.1-2021.3.31

1%

2021.4.1-2021.12.31

Outside Hubei

1%

2020.3.1-2021.12.31

Reduced VAT rates

Since the first COVID-19 outbreak in Wuhan city, China exempted small-scale taxpayers in Hubei province from paying VAT and reduced VAT for small-scale taxpayers in the other regions. But as the pandemic receded, this preferential tax policy is tightened.

From April 1, 2021 through December 31, 2021, all small-scale VAT taxpayers (both in Hubei or outside Hubei), to which a VAT levy rate of 3 percent is applicable, can pay VAT at the reduced levy rate of 1 percent; they may also prepay VAT at the reduced pre-levy rate of 1 percent for their items subject to a pre-levy rate of 3 percent.

Increased VAT threshold

China also raised the VAT exemption threshold for small-scale VAT taxpayers from April 1, 2021 to December 31, 2022. The VAT threshold for small-scale taxpayers has been lifted to RMB 150,000 (approx. US$23,240) per month (or RMB 450,000 per quarter, approx. US$69,700) from the previous RMB 100,000 (approx. US$15,200) per month (or RMB 300,000 per quarter, approx. US$45,800).

In other words, if the monthly sales amount of the small-scale taxpayer is under RMB 150,000 (or the quarterly sales amount is under RMB 450,000 for taxpayers who choose one quarter as a tax payment period), the taxpayer will not be subject to VAT.

There is one situation where the taxpayer with monthly sales of over RMB 150,000 can still be exempt from VAT. That is when the taxpayer occasionally occurs real estate transactions that month. Some small-scale taxpayers have the obligation to pre-pay VAT tax. The policy has clarified that if their monthly sales in the place where the VAT needs to be pre-paid do not exceed RMB 150,000, they are not required to pre-pay VAT.

The state tax authority has clarified that if a small-scale taxpayer with total monthly sales of more than RMB 150,000, but after deducting the sales of real estate, other sales (i.e., the sales of goods, labor, services, and intangible assets) do not exceed RMB 150,000, the small-scale taxpayer can still be exempt from VAT.

VAT Liability Threshold for Small-Scale Taxpayers

Monthly sales amount

Quarterly sale amount

Effective period

RMB 100,000

RMB 300,000

2021.1.1-2021.3.31

RMB 150,000

RMB 450,000

2021.4.1-2022.12.31

Education surcharge and other tax reduction

China’s national and local education surcharges are calculated based on a taxpayer’s actual payment of VAT and consumption tax.

At present taxpayers whose sales amount does not exceed RMB 100,000 per month (or RMB 300,000 per quarter) will be exempt from education surcharge, local education surcharge, and water conservancy construction fund.

As mentioned above, since April 1 this year, the VAT threshold for small-scale taxpayers has been lifted to RMB 150,000/month (or RMB 450,000/quarter). However, taxpayers should note that the new VAT threshold will not affect the payment of education surcharge unless the relevant policy is updated.

Aside from the exemption of education surcharges, taxpayers can keep an eye on additional tax and fee relief offered locally.

Local governments are granted authority to reduce levying of six types of taxes and two fees on small-scale taxpayers within the tax base of 50 percent. The six taxes and two fees refer to resource tax, urban maintenance and construction tax, property tax, urban land use tax, stamp duty (excluding stamp duty on securities transactions), arable land use tax, education surcharge, and local education surcharge.

IIT incentives for small business owners

From January 1, 2021 to December 31, 2022, during which period individually owned businesses, sole proprietorships, and partnership enterprises can enjoy some individual income tax (IIT) relief.

For the portion of an individually owned business’ income from a business operation that does not exceed RMB 1 million, the business is entitled to a 50 percent reduction of IIT on the basis of the prevailing incentives.

From April 1, 2021, individually owned businesses, sole proprietorship enterprises, partnership enterprises, and individuals will no longer be required to pre-pay IIT at the time of issuance of cargo transport VAT invoices on behalf.

Tax measures to lower financing costs of small businesses

To help small and micro enterprise raise funds, China exempts financial institutions from paying VAT on their interest income derived from small loans to farmers, small enterprises, micro enterprises, and individually owned businesses. Besides, loan contracts signed between small or micro enterprises and financial institutions are exempt from stamp duty.

Both measures are effective until December 31, 2023.

Other general incentives

As provided below, other projects are also entitled to CIT preferential policies. Investors should consult tax professionals in China for information on the most up-to-date tax incentives available to them.

  • CIT incentives for hiring disabled employees - An additional 100 percent deduction of salaries paid to disabled employees on the basis of actual deduction.
  • Tax reduction for enterprises investing in west China - Qualified enterprises making investments to encouraged industries in the west China region can enjoy a reduced CIT rate of 15 percent before December 31, 2030, upon approval by the relevant tax office. The western region includes, but is not limited to, Chongqing Municipality, Sichuan Province, Yunnan Province, Guizhou Province, Shanxi Province, and Ningxia Province.
  • Income derived from eligible technology transfers - Income as obtained by a resident enterprise through transferring eligible technology could be exempted from CIT for the part not exceeding RMB 5 million, and the excess shall be subject to 50 percent CIT reduction.
  • Tax reduction for enterprises investing in seed-stage or start-up technology enterprises - Qualified enterprises making investment to seed-stage or start-up technology enterprises in pilot cities--Beijing, Tianjin, Hebei, Shanghai, Guangdong, Anhui, Sichuan, Wuhan, Xi’an, Shenyang and Suzhou Industrial Zone, can deduct 70 percent of the investment amount from the taxable income from January 1, 2017. Investments made two years prior to the effective date could also apply this benefit. This incentive has been expanded nationwide since January 1, 2018.
Download this guide on PDF

Find Other Guides and Magazines:

magazines

Your Insights & Resources Library for Asia

Asiapedia is a collection of resources based on what we have learned about doing business in Asia. It’s the product of more than 300 team members collaborating across 28 offices in Asia, Europe, and North America.

or
Back to top