Hi-Tech Enterprises

a. Approved high and new-tech industries shall pay the corporate income tax at the discounted rate of 15%.
b. For newly established new and high-tech industries, corporate income tax will be exempted for the first two years beginning from the first profit-making year.
C. If a foreign-invested enterprise operates for a period of more than 10 years, income tax will be exempted for the first two years beginning from the first year in profit and reduced to 50% from the third to the fifth year. When the preferential period is due, if rated as a technologically advanced enterprise, it can still enjoy the 50% reduction for the following three years.

Software and Integrated Circuit Industries

1. Tax Policies for Encouraging the Development of Software Industry

①From June 24th, 2000 to the end of 2010, for ordinary taxpayers who sell self-developed software products, VAT will be collected at the rate of 17% according to the law. If the actual tax bearing of the VAT exceeds 3%, this extra payment will be refunded immediately upon the collection. The refund will be used for software development and expansion instead of as the taxable income, thus free from corporate income tax.

 ②. For newly established software enterprises in our country, corporate income tax will be exempted for the first two years beginning from the year in profit, and reduced to 50% from the third to the fifth year after the authorityˉs approval.
  
③For key software businesses under the state plan, corporate income tax will be collected at the rate of 10% in the year when it doesnt enjoy tax-free policies.

④. Salary and training fees in software enterprises can be deducted from the due rental according to its actual cost.

 ⑤For enterprises and government-sponsored institutions, the acquisition cost of software, if no less than fixed assets standard or intangible assets, can be calculated as fixed assets standard or intangible assets. The domestic enterprises should get the approval of taxation departments in charge.

 ⑥IC designers will be considered as software enterprises, and enjoy the same tax incentives.    

2. About Tax Incentives for the Development of the IC Industry

①From June 24th, 2000 to the end of 2010, for ordinary taxpayers who sell self-produced integrate circuit (including monocrystal silicon chips), VAT will be collected at the rate of 17% according to the law. If the actual tax bearing of the VAT exceeds 6%, this extra payment will be refunded immediately upon the collection. The refund will be used for integrate circuit development and expansion instead of as the taxable income, thus free from corporate income tax.

IC product refers to the product that carries out special circuit or systematic functions. It is made through integrating components of electrical equipment onto a semi-conductor monocrystalline chip or ceramic chip with a special process and is sealed inside an outer covering.

Monocrystalline silicon chip is semiconductor silicon material in the state of single crystal.     

 ②Production equipment used by the domestic-invested IC manufacturers will be subject to examination and approval of the tax authorities; Production equipment used by the foreign-invested firms with investment over 30 million US Dollars will be subject to approval of the State Bureau of Taxation; Production equipment used by the foreign-invested firms with investment below 30 million US Dollars will be subject to examination and approval of the tax authorities with its period of depreciation being appropriately shortened to three years minimally.

 ③IC manufacturers whose investment exceeds 8 billion RMB Yuan and those who produce ICs with wire below 0.25um in width will be granted with the following tax incentives:

1. Enjoying the same preferential tax policies for foreign investment in energy and transportation.

2. Import of production-used raw materials and consumption goods for their own use will be exempted from tariffs and import value-added tax.