November 10th, 2016 - The Chinese government announced a change in a preferential tax policy for certain firms.



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PRC Ministry of Finance, November 10th, 2016. (财税〔2016〕122号 关于在服务贸易创新发展试点地区推广技术先进型服务企业所得税优惠政策的通知)

Inception date: 01 Jan 2016 | Removal date: 31 Dec 2017

Tax or social insurance relief

On November 10th, 2016, several Chinese ministries published an announcement detailing a new scheme centring on several pilot locations around the PRC.

The scheme is very similar to an existing one that was started in 2009 and updated in 2014, that granted eligible firms a reduction in corporate income tax (CIT) from 25 to 15%; up to 8% of employee education expenses (as a percentage of total employee salary expenses) tax deductible (usually up to 2.5%); and tax exemption on income from offshore service outsourcing income.

This new announcement includes a new list of 15 pilot locations designated as 'service trade demonstration areas'. The previous (2014) policy had focused on 'service outsourcing demonstration areas', with five of the areas in the November 2016 announcement being completely.

In the November 2016 announcement, a new list of business activities that could qualify for the preferential treatment is included, with significant expansions over the previous one.

The announcement explicitly states that the 2014 policy is still in effect, presumably meaning only the places in this announcement are able to benefit from the expanded list of sectors.

The new list is quite broad, being restructured from the old one's ITO, BPO and KPO system. Categories now included are:

  • Information systems integration services
  • Data services
  • R&D services
  • Industrial design services
  • International intellectual property transfer services
  • Cultural items production services
  • Translation, dubbing, production services for the above
  • Chinese medicine services

The scheme is billed to last until the end of 2018. It was expanded in 2017 and again in 2018.

For more information on other policies mentioned in this description, please see related acts.