On 20 April 2012, the Ministry of Finance issued Notice No. 27. To support the development of the national integrated circuit (IC) and software industry, several tax incentives will be in force from 1 January 2011 to 31 December 2017:
- Companies producing integrated circuits smaller than 0.8um do not need to pay business tax within the first two profitable years. From the third to the fifth profitable year, IC companies only need to pay 50% of the Chinese business tax rate.
- Companies producing integrated circuits smaller than 0.25um or investing more than RMB 8 billion (ca. USD 1.2 billion) can benefit from a flat rate of 15% business tax. Within this category, companies that have a investment time horizon of more than 15 years may be exempted from the business tax from the first to fifth profitable year, and 50% tax reduction from the sixth to tenth profitable year, till 31 December 2017.
- The newly established IC and software companies do not need to pay business tax within the first two profitable years. From the third to the fifth profitable year, these companies only need to pay 50% of the Chinese business tax rate.
- Other state supported IC companies that do not benefit from this policy can enjoy a flat rate of 10% business tax.
- Companies should be registered in China, and at least 40% of the employees should have at least a university bachelore degree. At least 20% of the employees should be involved in the R&D activities.
The GTA includes state guarantees and other financial incentives that are likely to affect the restructuring and performance of firms facing international competition, whether from imports, in export markets, and from foreign subsidiaries.