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China Grants Hi-tech Firms Preferential Taxation Rules
China encourages the development of high-tech industries, many of which are located in the some 50 high-tech parks, and grants them preferential taxation policies.
Preferential taxation polices in these parks are similar, and Beijing's Zhongguancun High-tech Park, dubbed as China's Silicon Valley, can be an example to introduce some major taxation polices in these parks.
Major taxation policies include: 1. The corporate income tax for high-tech companies is reduced to 15 percent. And if the export of such businesses account for more than 40 percent of the total production of the companies, the corporate income tax will be collected at a rate of 10 percent after verification and approval from related taxation departments.
2. A company with one or more new technologies may be exempted from corporate income tax for the first three years of their operation. From the fourth year to the sixth year, the income tax will be collected at half of the rate regulated in Item 1.
3. The taxes exempted should be set aside as "State support funds" which can only be used for the development and production of new technologies and should not be used or distributed as welfare among employees.
4. After the approval from local financial and taxation departments, the expenses used for researches on new products, technologies, and techniques by high-tech enterprises, and key equipment and testing facilities purchased for the above purposes in the current year can be counted into costs. If the expenses grow more than 10 percent than the previous year, 50 percent of the expenses can be regarded as payment for the taxes of the enterprises during the current year. Companies which are owned by the State or the shares of which are controlled by the State should apply for the approval from financial departments or governing taxation bureaux of municipalities, counties or districts; other types of companies need to get approval from governing taxation bureaux.
5. Expenses below 500,000 yuan (US$60,000) for the purchase of advanced technologies, inventions and patents by high-tech enterprises can be counted into management expenses after approval from financial departments for State-owned or State-controlled high-tech businesses or otherwise from governing taxation bureaux. If the expenses are more than 500,000 yuan, the expenses can be included in management costs within a valid period or beneficial period stipulated by related laws after approval from financial and taxation departments of local governments for State-owned or controlled companies. For other types of businesses, they can be directly merged into management costs after approval from governing taxation bureaux.
Procedures to handle taxation exemption: 1. High-tech companies may bring an application for taxation exemption, a duplicated copy of business licences, capital verification report, and certificate of high-tech companies to governing taxation bureaux to handle taxation exemption procedures.
2. According to a regulation on the selection of taxation exemption and reduction period for newly founded enterprises, they may choose to start their taxation exemption period from January 1 of the next year, if they get their taxation registration certificate after June 30, which is not applicable to the enterprises whose taxation registration certificates are issued before June 30.
Procedures to handle taxation reduction: 1. A high-tech company should bring its application for taxation reduction, a duplicated copy of its business licence, its high-tech enterprise certificate, a duplicated copy of the approval on taxation reduction by related financial and taxation departments (together with the original copy for verification) to governing taxation bureaux to handle taxation reduction procedures.
2. Companies which wish to apply for 50 percent reduction of corporate income taxes should also bring their income tax declaration forms at the end of each tax reduction period and balance sheets to governing taxation bureaux to handle tax reduction procedures
Source: chinadaily.com.cn
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