Brief Introduction of High-tech Industry Development Policy of Zhongguancun Science Park -- Tax Incentives-Company Formation_Trademark Registration_Tax Service - Hong Kong CPA

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Brief Introduction of High-tech Industry Development Policy of Zhongguancun Science Park -- Tax Incentives

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Policies on reduction and exemption of corporate income tax

(1) Starting from January 1, 2018, venture capital enterprises investing in equity in unlisted small and medium-sized high-tech enterprises for more than 2 years (24 months), can deduct those venture capital enterprises’ taxable income based on 70% of their investment in small and medium-sized high-tech enterprises in the year when the equity is held for 2 years; if the current year income is insufficient, the deduction can be carried forward in the subsequent tax year.

-- Enterprise Income Tax Law of the People's Republic of China, clause 11
-- Implementation Regulations of the Enterprise Income Tax Law of the People's Republic of China, clause 97
-- Guo Shui Fa 〔2009〕No. 87

(2) Starting from 1 January 2018, limited partnership venture capital enterprises investing in equity in unlisted small and medium-sized high-tech enterprises for more than 2 years (24 months), can deduct those limited partnership venture capital enterprises’ taxable income based on 70% of their investment in small and medium-sized high-tech enterprises in the year when the equity is held for 2 years; if the current year income is insufficient, the deduction can be carried forward in the subsequent tax year.

The investment amount of the legal partner of a limited partnership venture capital enterprise in an unlisted small and medium-sized high-tech enterprise shall be calculated and determined based on the investment amount of the limited partnership venture capital enterprise in a small and medium-sized high-tech enterprise and the investment ratio of the legal person partner stipulated in the partnership agreement.

-- Cai Shui 〔2015〕No. 116, clause 1
-- Announcement of the State Administration of Taxation〔2015〕No. 81

(3) Starting from 1 January 2018, limited partnership venture capital enterprises investing in equity in technology start-ups for more than 2 years (24 months), individual partners can deduct taxable operating income from the partnership venture capital enterprises based on 70% of their investment in the technology start-ups; if the current year income is insufficient, the deduction can be carried forward in the subsequent tax year.

-- Cai Shui 〔2018〕 No. 55, clause 1 and 2
-- Announcement of the State Administration of Taxation〔2018〕No. 43
-- Cai Shui 〔2019〕No. 13, clause 5

(4) Starting from July 1 2018, angel investment individuals who have directly invested in technology start-ups for 2 years, can deduct the taxable income obtained by transferring the equity of the technology start-ups on the basis of 70% of the investment amount ; if the current year income is insufficient, the deduction can be carried forward in the subsequent tax year. If an angel investment individual invests in a number of technology start-ups, for those technology start-ups that have been dissolved and liquidated, if the angel investment individual has not deducted 70% of their investment amount, the unused amount can be used to offset taxable income obtained by transferring the equity of other technology start-ups within 36 months from the date of liquidation.

-- Cai Shui〔2018〕 No. 55, clause 1 and 2
-- Announcement of the State Administration of Taxation〔2018〕No. 43
-- Cai Shui〔2019〕No. 13, clause 5

(5) With respect to the R&D expenses actually incurred by an enterprise in the course of its R&D activities, an extra 75% of the amount of R&D expenses actually incurred is deductible before tax payment, in addition to the deduction of actual expenses as prescribed, during the period from January 1, 2018, to December 31, 2020, provided that the said expenses are not converted into intangible asset and included in the current profits and losses; if the said expenses have been converted into intangible asset, such expenses may be amortized at the rate of 175% of the costs of the intangible assets before tax payment during the said period.

-- Enterprise Income Tax Law of the People's Republic of China, clause 30, item 1
-- Implementation Regulations of the Enterprise Income Tax Law of the People's Republic of China, clause 95
-- Cai Shui 〔2015〕 No. 119
-- Announcement of the State Administration of Taxation 〔2015〕No. 97
-- Announcement of the State Administration of Taxation 〔2017〕No. 40
-- Cai Shui 〔2018〕 No. 99

(6) 80% of the expenses actually incurred by the entrusted overseas R and D activities shall be included in the entrusted overseas research and development expenses of the entrusting parties. The part of entrusted overseas research and development expenses not exceeding two-thirds of the eligible domestic research and development expenses may be subject to weighted pre-corporate income tax deduction as prescribed.

-- Cai Shui 〔2015〕 No. 119
-- Announcement of the State Administration of Taxation 〔2015〕No. 97
-- Cai Shui 〔2018〕No. 64
-- Cai Shui 〔2018〕 No. 99

(7) Within a tax year, the portion of a resident enterprise ’s technology transfer income that does not exceed 5 million yuan is exempted from enterprise income tax; the portion exceeding 5 million yuan is halved from enterprise income tax.

-- Enterprise Income Tax Law of the People's Republic of China, clause 27, item 4
-- Implementation Regulations of the Enterprise Income Tax Law of the People's Republic of China, clause 90
-- Cai Shui 〔2010〕 No. 111
-- Cai Shui 〔2015〕 No. 116
-- Announcement of the State Administration of Taxation 〔2013〕 No. 62
-- Announcement of the State Administration of Taxation 〔2015〕 No. 82

(8) If an enterprise or individual invests in a domestic resident enterprise with technological achievements, and the consideration paid by the invested enterprise is all stocks (equity), the investment and shareholding may not be taxed for current period. It is allowed to defer the calculation of income tax on the basis of the difference of the income obtained from transferring the equity deducting the original value of the technological achievements and reasonable taxes.

-- Cai Shui 〔2016〕No. 101, clause 3,
-- Announcement of the State Administration of Taxation 〔2013〕 No. 62

(9) The state-supported high-tech enterprises are subject to a corporate income tax at the reduced rate of 15%.

-- Enterprise Income Tax Law of the People's Republic of China, clause 28, item 2
-- Implementation Regulations of the Enterprise Income Tax Law of the People's Republic of China, clause 93
-- Cai Shui 〔2011〕No. 47
-- Guo Ke Fa Huo 〔2016〕No. 32
-- Guo Ke Fa Huo〔2016〕No. 195
-- Announcement of the State Administration of Taxation 〔2017〕 No. 24

(10) Beginning from 1 January 2018, the losses of an enterprise currently qualified as a high and new technology enterprise or a small or medium-sized technological enterprise that occurred during the prior five years and are still not fully covered may be carried over for covering in subsequent years, and the maximum carryover period shall be extended from 5 years to 10 years.

-- Cai Shui 〔2018〕No. 76

(11) Beginning from 1 January 2018, the enterprise income tax on the determined advanced technology service enterprises (in the category of trade in services) shall be levied at the reduced rate of 15%.

-- Cai Shui 〔2017〕No. 79
-- Cai Shui 〔2018〕No. 44

(12) For a qualified software enterprise legally formed, the preferential period shall begin from the first profit-making year prior to December 31, 2018. It shall be exempted from enterprise income tax for the first two years of the preferential period and pay enterprise income tax at the reduced rate of half of the statutory rate of 25% from the third year to the fifth year until the expiry of the preferential period.

-- Cai Shui 〔2012〕No. 27
-- Cai Shui 〔2016〕No.49
-- Announcement of Ministry of Finance, State Administration of Taxation 〔2019〕No. 68

(13) For an eligible key software enterprise under the National Planning and Layout, the enterprise income tax can be levied at the reduced rate of 10% in the year of not enjoying tax exemption.

-- Cai Shui 〔2012〕No. 27, clause 4
-- Cai Shui 〔2016〕No.49
-- Fa Gai Gao Ji 〔2016〕No. 1056

(14) An integrated circuits manufacturing enterprise with an investment of more than 8 billion yuan are subject to the enterprise income tax at reduced rate of 15%.

-- Cai Shui 〔2012〕No. 27, clause 2
-- Cai Shui 〔2016〕No.49
-- Cai Shui 〔2018〕No.27, clause 7

(15) An integrated circuits manufacturing enterprise with an investment of more than 8 billion yuan which established on or before 31 December 2017 with operating period over 15 years and is not profitable, is exempt from enterprise income tax from the first profitable year to the fifth, and is subject to enterprise income tax at reduced rate of half of the statutory rate or 25% from the sixth year to the tenth until the expiry of the preferential period.

-- Cai Shui 〔2016〕No.49
-- Cai Shui 〔2018〕No.27, clause 5

(16) Certified animation enterprises independently develop and produce animation products can apply for the State current preferential income tax policies that encourage the development of the software industry. The preferential period shall start from the profitable year before December 31, 2018.

-- Cai Shui 〔2009〕No. 65, clause 2
-- Announcement of Ministry of Finance, State Administration of Taxation 〔2019〕No. 68
-- Wen Shi Fa 〔2008〕No. 51

(17) For a qualified integrated circuit design enterprise or software enterprise legally formed, the preferential period shall be calculated from the first profit-making year prior to December 31, 2018. It shall be exempted from enterprise income tax for the first two years of the preferential period and pay enterprise income tax at the reduced rate of half of the statutory rate of 25% from the third year to the fifth year until the expiry of the preferential period.

-- Announcement of Ministry of Finance, State Administration of Taxation 〔2020〕No. 29

(18) For the tax refund paid to a software enterprise enjoying the refund-upon-collection policy of immediate refund upon payment, if it is used in the research and development of software products and in the expansion of reproduction, it should not be regarded as taxable income for enterprise income tax, and not be subject to the enterprise income tax.

-- Cai Shui 〔2011〕No. 100
-- Cai Shui 〔2012〕No. 27, clause 5
-- Cai Shui 〔2016〕No. 49
Preferential policies on value added tax (VAT)

(1) From 1 January 2019 to 31 December 2021, for state-level and provincial-level science and technology enterprise incubators, the revenues derived from the provision of incubation services to incubated objects shall be exempt from value-added tax.

-- Cai Shui 〔2018〕No. 120

(2) From 1 January 2019 to 31 December 2021, for makerspaces registered with the state relevant authority, the revenues derived from the provision of incubation services to incubated objects shall be exempt from value-added tax.

-- Cai Shui 〔2018〕No. 120

(3) Where it is truly necessary for domestic enterprises that meet the prescribed requirements to import the commodities as listed in the ‘Catalogue of Imported Key Components and Raw Materials for Crucial High-Tech Equipment and Products’ for manufacturing the equipment or products as listed in ‘The Catalogue of Crucial High-Tech Equipment and Products that Enjoy the State Support’ thereto, such commodities shall be exempted from tariff and import value-added tax.

-- Cai Guan Shui 〔2018〕No. 42

(4) From 1 January 2016 to 31 December 2020, scientific research, scientific and technological development and teaching supplies that cannot be produced domestically or fail to meet the requirements in terms of performance as imported by scientific research institutions, technological development institutions, schools and other entities shall be exempted from import tariff, import value-added tax (“VAT”) and consumption tax. The books and materials, among others, used for scientific research and teaching imported by publication importers for scientific research institutions and schools shall be exempted from import VAT.

-- Cai Guan Shui 〔2016〕No. 70
-- Cai Guan Shui 〔2016〕No. 71
-- Cai Guan Shui 〔2016〕No. 72

(5) Beginning on 15 July 2010, where the project undertaking enterprises use central government funding, local financial funds, unit self-raised funds and funds obtained from other channels to import key projects (topics) that are not domestically produced (including software tools and technologies), spare parts, and raw materials, the import tariffs and import value-added tax are exempt.

-- Cai Guan Shui 〔2010〕No. 28

(6) Taxpayers providing technology transfer, technology development and related technical consultation and technical services are exempt from VAT.

-- Cai Shui 〔2016〕No. 36, Annex 3, clause 1, item 26

(7) If general VAT taxpayers sell self-developed and produced software products, after VAT has been collected at a tax rate of 17% (Note: beginning from 1 May 2018, rate of 17% was adjusted to 16%; beginning from 1 April 2019, rate of 16% was adjusted to 13%), the refund-upon-collection policy shall be applied to the part of actual VAT burden in excess of 3%.

-- Cai Shui 〔2011〕No. 100
-- Cai Shui 〔2018〕No. 32, clause 1
-- Announcement of Ministry of Finance, General Administration of Taxation and General Administration of Customs 〔2019〕No. 39, clause 1

(8) Beginning from 1 November 2011, to grant refund of un-credited VAT at end of each period formed by the procurement of equipment (hereinafter referred to as un-credited VAT on the purchased equipment) by enterprises of major IC projects approved by the State.

-- Cai Shui 〔2011〕No. 107
-- Implementation Rules of the Provisional Regulations of the People's Republic of China on Value Added Tax, clause 21, item 2

(9) Beginning on 1 May 2018, if general VAT taxpayers in animation business sell self-developed and produced animation software products, after VAT has been collected at a tax rate of 16% (Note: beginning from 1 April 2019, rate of 16% was adjusted to 13%), the refund-upon-collection policy shall be applied to the part of actual VAT burden in excess of 3%.

-- Wen Shi Fa 〔2008〕No. 51
-- Cai Shui 〔2018〕No. 38
-- Announcement of Ministry of Finance, General Administration of Taxation and General Administration of Customs 〔2019〕No. 39, clause 1
Policies on tariff preference

(1) For those foreign-funded R&D centers qualified for tax exempt, from the day of issuance of announcement, may enjoy the policy of supporting import of scientific and technological innovations, and import free of tax based on the tax-free list of scientific research, technological development and teaching supplies.

-- Measures for the Administration of the Tax-Exempt Import of Articles for Scientific Research, Scientific and Technological Development, and Teaching by Foreign-Funded Research and Development Centers， clause2， item3

(2) From 1 January 2016 to 31 December 2020, animation enterprises approved by relevant department of the State Council which self-develop and produce animation direct products, and where it is necessary to import products, are exempt from import VAT.

-- Cai Shui 〔2009〕No. 65, clause 4
-- Cai Guan Shui 〔2016〕No. 36
Urban land use tax and property tax

(1) From January 1, 2019 to December 31, 2021, the buildings and land used by state-level and provincial-level science and technology enterprise incubators, university science parks and makerspaces registered with the state's relevant authority themselves or provided to incubated objects for gratuitous use or lease shall be exempt from property tax and urban land use tax.

-- Cai Shui 〔2018〕No. 120
Individual Income Tax

(1) Beginning from 1 July 1999, scientific research institutions and institutions of higher learning shall give individual rewards in the form of shares or investment proportion for the transformation of job-related scientific and technological achievements. When the winners obtain shares or investment proportion, they shall not pay individual income tax temporarily; individual income tax shall be paid in accordance with the law when obtaining income from dividend or transfer of equity or proportion of capital contribution.

-- Cai Shui Zi 〔1999〕No. 45, clause 3
-- Guo Shui Fa 〔1999〕No. 125

(2) If a high-tech enterprise transforms its scientific and technological achievements and gives an equity award to the relevant technical personnel of the enterprise, and it is difficult for an individual to pay taxes at one time, he or she may, according to the actual situation, formulate a tax payment plan by instalments, pay the tax by instalments within no more than 5 calendar years (including), and report the relevant data to the competent tax authority for filing.

-- Cai Shui 〔2015〕No. 116, clause 4
-- Announcement of the State Administration of Taxation 〔2015〕80, clause 1

(3) When small and medium-sized high-tech enterprises transfer undistributed profits, surplus reserve and capital reserve to individual shareholders to increase their share capital, if it is really difficult for individual shareholders to pay individual income tax at one time, they can make their own tax payment plan by instalments according to the actual situation, pay by instalments within no more than 5 calendar years (including), and report the relevant information to the competent tax authority for filing.

-- Cai Shui 〔2015〕No. 116, clause 3
-- Announcement of the State Administration of Taxation 〔2015〕80, clause 2

(4) The cash rewards granted by not-for-profit research and development institutions and institutions of higher education formed upon approval according to law to scientific and technological personnel out of the income from the transformation of job-related scientific and technological achievements in accordance with the Law of the People's Republic of China on Promoting the Transformation of Scientific and Technological Achievements may be included in the “income from wages and salaries” of scientific and technological personnel in the current month at a reduced rate of 50% , and be subject to individual income tax according to law.

-- Cai Shui 〔2018〕No. 58

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Brief Introduction of High-tech Industry Development Policy of Zhongguancun Science Park -- Tax Incentives

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