ANNOUNCEMENT 09 Feb 2015

February 9th, 2015 - Several Chinese ministries announced preferential tax policies for firms in the integrated circuit industry.

NUMBER OF INTERVENTIONS

1

  • 1 harmful
  • 0 neutral
  • 0 liberalising

SOURCE

PRC State Administration of Taxation, February 9th, 2015. (财税〔2015〕6号 关于进一步鼓励集成电路产业发展企业所得税政策的通知)
http://www.chinatax.gov.cn/chinatax/n810341/n810765/n1465977/201503/c1677269/content.html

Inception date: 01 Jan 2014 | Removal date: 31 Dec 2017

Tax or social insurance relief

On February 9th, 2015, the Chinese government announced preferntial tax policies for certain firms in the integrated circuit (IC) industry.

The scheme is very similar to one that targeted IC manufacturers; please see related act for more information.

The policy grants a two-year corporate income tax (CIT) exemption, followed by a 50% reduction in the standard CIT rate of 25% for the subsequent five years to eligible firms. The policy begins from the first profitable year before the end of 2017.

Two types of firms are targeted by the policy:

  1. Manufacturers of key materials and equipment required for IC production (but not the producers themselves);
  2. Firms engaging in the packaging and/or testing of ICs.

Requirements for such firms are listed below (numbers for Type 1 given first, then Type 2, where different):

  • Chinese firm established on or after 1 January 2014;
  • At least 40% of employees at least have a bachelors' degree;
  • At least 20% of employees engaged in R&D;
  • Companies must have rights to key technologies needed for their operations;
  • 60% of R&D expenses must be incurred within the PRC;
  • Such expenses must account for 3.5/5% of annual turnover;
  • Revenues from IC-related activities must account for at least 60/30% of total revenues.

The policy came into effect retroactively from the beginning of 2014.

AFFECTED SECTORS