Ministry of Finance and State Taxation Administration have jointly issued a notification as “the Enterprise Income Tax Policies for the Key Industries in China (Shanghai) Pilot Free Trade Zone Lingang New Area” (the “Notification”) on July 13th, 2020. Shanghai Dongjin finds the main points as follows.
For those enterprises which are in the key fields and core business of integrated circuit, artificial intelligence, biological medicine and civil aviation, and with substantial production and R&D activities, the enterprise income taxes shall be reduced to 15% from the day of their establishments within 5 years.
The qualified legal entity shall meet the below conditions 1 and 2 at the same time, OR one of conditions 3 and 4;
- the new establishment legal entity which was registered in Lingang New Area after January 1st, 2020 (and exclusive of the Companies which move in from other districts) and its main business involving in The Catalogue of Key Fields and Core Links in Integrated Circuit, Artificial Intelligence, Biological Medicine and Civil Aviation (the “Catalogue”, listed as the Annex to the Opinion) and with the substantive production and R&D activities. Substantive production or R & D activities means the enterprise has a fixed production and operation site and fixed staff, the supporting conditions of software and hardware matching with the production or R & D activities, and carries out relevant business on such basis.
- The main products researched and developed or sold cover at least one key technology. The Key technology means the significant or necessary technology in the key industry chains in the fields of integrated circuit, artificial intelligence, biological medicine and civil aviation.
- The conditions for investment subjects
(1) The investment subject stays at the top of the list in the international market segmentation, and its technical strength stays at the top of the list in the industry;
(2) The investment subject stays at a leading position in the domestic market segmentation, and its technical strength stays at a leading position in the industry.
- The conditions for R&D:
(1) Enterprise having a leading talent and a core team backbone who has worked in the related fields in the local and oversea scientific R&D for a long time;
(2) Enterprise owns the key technology and has the ability to set an independent intellectual property system for its main product;
(3) Enterprise with the ability to enhance the diversification for suppliers in the key industry chains and to lead the upgrade the domestic industry;
(4) Enterprise having the ability for high-level supplies, their core technical indicators reached an international forefront position or a domestic leading position;
(5) The R&D achievement (technology or product) of the enterprise has been accepted by domestic or oversea frontline terminal equipment manufacturers, or has set up the solid cooperation with them (including capital, R&D and project and other fields);
(6) Enterprise obtaining the special funds for technology or industrialization from the state or provincial government, or governmental investment funds, or investments from well-known investment and financial institutions.
This Notification shall be implemented since January 1st, 2020. For those enterprises which has established in Lingang New Area before December 31st, 2019 but still meet the requirements in the Catalogue, they could follow this Notification from 2020 until 5 years after its establishments.
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Mr. Mike Chang
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