Preparing for China’s Annual CIT Filing: Have You Exhausted All CIT Incentives?

China provides multiple CIT incentives to incentivize or encourage a particular economic activity or to support disadvantaged business owners. From the investor’s perspective, these tax incentives are legitimate tools for reasonable tax planning and cost savings. Also, it is a useful indicator of market trends and government priorities.

Before May 31 every year, businesses operating in China are required to conduct an annual corporate income tax (CIT) reconciliation, which is also called annual CIT filing. This is a good chance for companies to examine if they have exhausted all possible tax incentives if they haven’t done so earlier in their annual audit.

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According to the latest Catalogue for Administration of Preferential CIT Policies released by the State Taxation Administration (STA) in 2018, there are in total 69 different CIT incentives that are available to enterprises. These include CIT exemption on a certain type of incomes, such as dividends, bonuses, and other equity investment income between qualified resident enterprises; CIT reductions on certain incomes, such as income derived from eligible technology transfer; additional pre-tax deduction of certain expenses, such as research and development (R&D) expenses; tax credits for certain costs, such as the investment in seed-stage or start-up technology enterprises; lower CIT rates (the standard CIT rate is 25 percent) for certain types of enterprises, such as high-tech companies or enterprises in certain regions, such as companies engaging in encouraged sectors in China’s western areas; and accelerated depreciation or one-time deduction of the value of fixed assets.

In this article, we introduce the most prominent ones that can be claimed by qualified businesses during this year’s CIT reconciliation.

CIT incentives for small businesses

China has recently enhanced its inclusive tax cut policy for small and low-profit enterprises (SLPEs).

SLPEs refer to enterprises engaged in non-restrictive and non-prohibited businesses that meet the following three conditions:

• Annual taxable income not exceeding RMB 3 million (approx. US$458,500);
• Number of employees not exceeding 300; and
• Total asset value not exceeding RMB 50 million (approx. US$7.7 million).

All types of SLPEs in China are able to enjoy a reduced CIT rate of 20 percent in combination with a reduction of their tax base.

Specifically, SLPEs are subject to:

• 20 percent CIT rate on 12.5 percent of the taxable income amount for the portion of taxable income not exceeding RMB 1 million (effective from January 1, 2021-December 31, 2022); and
• 20 percent CIT rate on 25 percent of their taxable income amount for the portion of taxable income more than RMB 1 million but not exceeding RMB 3 million (effective from January 1, 2022-December 31, 2024)

As a result, for an SLPE’s taxable income amounting up to RMB 1 million, an effective 2.5 percent CIT rate applies; for the portion of taxable income between RMB 1 million and RMB 3 million, an effective 5 percent CIT rate applies.

Because the SLPE evaluation is carried out at the entity level (instead of at the group level), small subsidiaries of foreign multinational enterprises (MNEs) in China can also benefit from these CIT cuts.

SLPEs enjoy a simplified tax filing procedure for eligibility of preferential tax treatment. They only need to fill the relevant sections when filing for CIT returns. That said, they will need to retain the below documents for potential future inspection:

• A statement that the enterprise engaging in industries not restricted or prohibited by the state;
• Calculation process of the number of employees;
• Calculation process of total assets.

CIT incentives for high and new technology enterprises (HNTEs)

HNTE treatment, which reduces a qualified taxpayer’s applicable CIT rate from the standard 25 percent to 15 percent, is one of China’s core tax incentives that encourage innovation.

Besides the lower CIT rate, starting from January 1, 2018, an additional preferential tax treatment has been granted to HNTE:

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Losses of qualified HNTE that occur five years prior to the year in which they become qualified and have not been made up – shall be allowed to be carried forward to subsequent years to be made up, and the maximum carry-forward period is up to 10 years. For normal enterprises, the maximum carry-forward period for losses is only five years.

Meanwhile, HNTEs can enjoy a one-off pre-tax deduction for equipment and instruments (fixed assets other than houses and buildings) newly purchased during the period from October 1, 2022 to December 31, 2022, and such deduction is allowed to be 100 percent weighted.

Upon obtaining the qualification as an HNTE, the enterprise shall enjoy the HNTE treatment starting from the year when the HNTE certificate is issued.

For the qualification and criteria, application process, and follow-up supervision and administration of HNTE status, please refer to our China briefing article: What Are the Tax Incentives in China to Encourage Technology Innovation?

CIT incentives for technology-based small- and medium-sized enterprises (TSMEs)

A TSME falls under the scope of SMEs that conduct technology-based activities, which consists of scientific and technological personnel who are involved in R&D activities and obtain IP for creating high-tech products or services.

Being qualified as a TSME, the losses of the enterprise occurred five years before the year in which they become qualified and have not been made up shall be allowed to be carried forward to subsequent years to be made up, and the maximum carry-forward period is up to 10 years. Besides, local governments may treat TSMEs as HNTE candidates and provide other incentives to support their growth. Moreover, TSMEs can enjoy super deductions on their R&D expenses.

Starting from January 1, 2022, if the R&D expenses of TSMEs do not form intangible assets and are included in the current profits and losses, on the basis of actual deduction, an additional 100 percent of such R&D expenses could be deducted from the taxable income amount; if the R&D expenses have formed intangible assets, they can be amortized before CIT at 200 percent of the actual cost of intangible assets.

Different from the HNTE qualification, the TSME status has special requirements on enterprises’ number of total employees, annual sales revenue amount, and total assets. On the other hand, the HNTE requires that the core technology of the enterprise’s key products (or services) is especially encouraged by the state and that the ratio of income from high-tech related operations against total income is not lower than 60 percent in the current period, while TSME has no such requirements. In general, it is easier to apply for TSME status for smaller businesses.

For the qualification and criteria, application process, and follow-up supervision and administration of TSME status, please refer to our China briefing article: What Are the Tax Incentives in China to Encourage Technology Innovation?

CIT incentives for advanced technology service enterprises (ATSEs)

In addition to HNTE and TSME, ATSE status is another core innovation tax policy in China to encourage the provision of information technology outsourcing (ITO), business process outsourcing (BPO), or knowledge process outsourcing (KPO) services to overseas entities.

Originally launched in the Suzhou Industrial Park in 2016, the ATSE incentive was rolled out nationwide in 2017, reducing the CIT rate for a qualified ATSE from the standard 25 percent to 15 percent, similar to the HNTE treatment.

For the qualification and criteria, application process, and follow-up supervision and administration of ATSE status, please refer to our China briefing article: What Are the Tax Incentives in China to Encourage Technology Innovation?

CIT incentives for software enterprises

CIT exemption and reduction for encouraged software enterprises

Starting from January 1, 2020, qualified software enterprises encouraged by the state are eligible for tax exemptions for two years and a half-rate tax reduction in the following three years, counting from the first profit-making year.

The qualification and criteria for ‘software enterprises encouraged by the state’ are stipulated in the Ministry of Industry and Information Technology (MIIT) Announcement [2021] No.10.

More about the qualification of this CIT incentive is introduced in our China Briefing publication: Tax, Accounting, and Audit in China 2022-23

CIT exemption and reduction for key software enterprises encouraged by the state

Starting from January 1, 2020, key software enterprises encouraged by the state are eligible for tax exemptions for five years and enjoy a reduced CIT rate of 10 percent in the following years, counting from the first profit-making year.

‘Key software enterprises encouraged by the state’ refer to those belonging to software enterprises encouraged by the state and satisfy at least one the three main criteria.

More about the qualification of this CIT incentive is introduced in our China Briefing publication: Tax, Accounting, and Audit in China 2022-23

Pretax deduction for VAT refunded upon collection that is used for software product R&D and reproduction expansion

Where the VAT refunds obtained by qualified software enterprises in accordance with the Notice of the Ministry of Finance and State Administration of Taxation on Value-added Tax Policy of Software Products (Caishui [2011] No. 100) are used for software product R&D, expansion, and reproduction by the enterprises and separately accounted for, such refunds can be regarded as non-taxable income and thus is deductible when calculating CIT taxable income. Qualified software enterprises here refer to software enterprises encouraged by the state.

In addition, qualified software enterprises can enjoy a 100 percent deduction of employee education expenses and accelerated depreciation or amortization of outsourcing software.

CIT incentives for integrated circuit (IC) enterprises

CIT exemption or reduction

Qualified IC enterprises are eligible to enjoy different tax exemption and reduction policies depending on the enterprise’s type, establishing date, profit-making year, investment amount, product type, and operation period:

• Starting from January 1, 2020, IC design, equipment, materials, packaging, testing enterprises encouraged by the state can enjoy tax exemption for two years and a half-rate tax reduction in the following three years, counting from the first profit making year for the IC enterprises;
• Starting from January 1, 2020, key IC design enterprises encouraged by the state can enjoy tax exemption for five years and a reduced CIT rate of 10 percent in the following five years, counting from the first profit making year for the IC enterprises;
• Starting from January 1, 2020, IC manufacturing enterprises or projects encouraged by the state with line width less than 28 nanometers (inclusive) and operation period of over 15 years, can enjoy tax exemption for 10 years, counting from the first profit making year for the IC enterprises or the first business revenue collection year for the IC projects;
• Starting from January 1, 2020, IC manufacturing enterprises or projects encouraged by the state with line width less than 65 nanometers (inclusive) and operation period of over 15 years can enjoy tax exemption for five years and a half-rate tax reduction in the following five years, starting from the first profit making year for IC enterprises or the first business revenue collection year for IC projects;
• Starting from January 1, 2020, IC manufacturing enterprises or projects encouraged by the state with line width less than 130 nanometers (inclusive) and operation period of over 10 years can enjoy tax exemption for two years and a half-rate tax reduction in the following three years, starting from the first profit making year for IC enterprises or the first business revenue collection year for IC projects;
• Qualified IC manufacturing enterprises or projects established after January 1, 2018 and starting to make profit before December 31, 2019, with line width less than 65 nanometers (inclusive) and operation period of over 15 years, can enjoy tax exemption for five years and a half-rate tax reduction in the following five years, starting from the first profit making year for IC enterprises or the first business revenue collection year for IC projects;
• Qualified IC manufacturing enterprises or projects established after January 1, 2018 and starting to make profit before December 31, 2019, with line width less than 130 nanometers

The qualification and criteria for ‘IC design, equipment, materials, packaging, testing enterprises encouraged by the state’ are stipulated by the MIIT NDRC MOF STA Announcement [2021] No.9. The qualification and criteria for ‘key IC manufacturing enterprises encouraged by the state’, ‘key IC design enterprises encouraged by the state’, and ‘IC manufacturing enterprises or projects encouraged by the state’ are stipulated by the Fa gai gao ji [2022] No.390. The qualification and criteria for ‘IC manufacturing enterprises’ are stipulated by Caishui [2016] No.49 and Caishui [2018] No.27.

Qualified IC enterprises are subject to list management, which needs to be applied annually. The recognition of qualified IC enterprises is mainly in charged by the NDRC and the MIIT, together with other departments such as the MOF and the STA.

IC enterprises that meet the conditions of multiple preferential policies shall choose one of the policies to enjoy. Those that have entered the preferential period, they can choose one of the policies to enjoy in the remaining term.

Longer loss carry-forward period

Starting from January 1, 2020, for IC manufacturing enterprises or projects encouraged by the state, with line width less than 130 nanometers (inclusive), their losses that occur five years prior to the year in which they become qualified and have not been made up – shall be allowed to be carried forward to subsequent years to be made up, and the maximum carry-forward period is up to 10 years. For normal enterprises, the maximum carry-forward period for losses is only five years.

In addition, qualified IC design enterprises can enjoy 100 percent deduction of employee education expenses and qualified IC manufacturing enterprises can enjoy accelerated depreciation or amortization of outsourcing software, which are introduced in the previous sections.

Super deduction on R&D expenditure

In an effort to encourage innovation, beyond the lower CIT rates and loss carry-forward policy introduced above, China also allows for the super deduction of the enterprise’s R&D expenses.

When calculating the CIT taxable income, while the cost is usually 100 percent deductible and the expenses, such as employee education expenses and advertising expenses, are subject to a deduction cap, the expense actually incurred by an enterprise in R&D activities enjoys the below preferential policies:

• For manufacturing enterprises (except tobacco manufacturing), starting from January 1, 2021, if the R&D expenses do not form intangible assets and are included in the current profits and losses, on the basis of actual deduction, an additional 100 percent of such R&D expenses could be deducted from the taxable income amount; if the R&D expenses have formed intangible assets, they can be amortized before CIT at 200 percent of the actual cost of intangible assets.
• For TSMEs, starting from January 1, 2022, if the R&D expenses do not form intangible assets and are included in the current profits and losses, on the basis of actual deduction, an additional 100 percent of such R&D expenses could be deducted from the taxable income amount; if the R&D expenses have formed intangible assets, they can be amortized before CIT at 200 percent of the actual cost of intangible assets.
• For other enterprises (except tobacco manufacturing, lodging and catering, wholesale and retail, real estate, leasing and commercial services, and entertainment), during the period between January 1, 2018 and December 31, 2023, if the R&D expenses do not form intangible assets and are included into the current profits and losses, on the basis of actual deduction, an additional 75 percent of such R&D expenses could be deducted from the taxable income amount; if the R&D expenses have formed intangible assets, they can be amortized before CIT at 175 percent of the actual cost of intangible assets.

To be noted, according to MOF STA MOST Announcement [2022] No.28, for enterprises entitled to the current additional pre-tax deduction ratio of 75 percent for R&D expenses, such ratio shall be raised to 100 percent during the period from October 1, 2022 to December 31, 2022.

Manufacturing enterprises are enterprises whose main business is in the manufacturing industry and whose main business income accounts for more than 50 percent of the total income in the year of enjoying preferential treatment.

For expenses incurred in R&D activities entrusted by enterprises to external institutions or individuals within China, 80 percent of the actual amount shall be included in the entrusting party’s R&D expenses and allowed for the additional deduction, and the entrusting party shall not make a further additional deduction.

For expenses incurred in R&D activities entrusted by enterprises to external institutions (exclude individuals) outside China, 80 percent of the actual expenses shall be itemized as the entrusting party’s commissioned overseas R&D expenses. The commissioned overseas R&D expenses, to the extent of two-thirds of the domestic R&D expenses, are eligible for the pre-tax additional deduction.

To be noted, R&D activities here refer to processes where an enterprise applies new science and technology knowledge creatively for the purpose of obtaining new science and technology knowledge or carrying out systematic activities with specific goals continuously for substantive improvement of technologies, products (services), and processes. Non-creative activities, such as conventional upgrades of the enterprise’s products, are not regarded as eligible for the R&D super deduction policy. The State Taxation Administration also has detailed guidance on the scope of the R&D expenses.

Similar to other CIT preferential policies, to enjoy the R&D expenses super deduction policy, enterprises can enjoy the incentive when making tax payments (at the time of pre-payment or final settlement) by self-evaluating if they are qualified and retain relevant documents for future potential inspection of the tax bureau for 10 years. To be noted, R&D activities entrusted to overseas institutions are subject to additional documentation requirements.

CIT incentives offered in different regions of China

CIT incentives offered in western China

Until December 31, 2030, enterprises set up in China’s western regions with their main businesses in encouraged industries of the specific region can enjoy a reduced corporate income tax (CIT) rate of 15 percent, according to MOF SAT NDRC Announcement [2020] No.23.

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The western regions are Inner Mongolia, Ningxia, Shaanxi, Gansu, Chongqing, Sichuan, Guizhou, Guangxi, Yunnan, Qinghai, Tibet, and Xinjiang. Some underprivileged cities in other provinces – Xiangxi, Enshi, Yanbian, and Ganzhou – may also adopt the same CIT preferential policy.

To be eligible, the enterprise’s main business must fit into the encouraged category of the relevant industry catalogues. And its main business revenue must account for at least 60 percent of its total business revenue.

In addition, to especially support the economic development of Xinjiang in Western China, from January 1, 2021 to December 31, 2030, enterprises set up in Xinjiang’s underprivileged areas whose main business is in encouraged industries can enjoy CIT exemption for the first two years (starting from the first income-generating year), and a halved CIT rate (that is, 12.5 percent) in the subsequent three years, according to Cai Shui [2021] No.27. Those set up in special economic development zones of Kashgar and Khorgos can be straightly exempt from CIT for five years (starting from the first income-generating year). This is the so-called “2+3 years tax holiday” or “5 years tax holiday”.

CIT incentives offered in Hainan FTP

Enterprises registered in Hainan Free Trade Port get the chance to enjoy the following CIT relaxations, according to Cai Shui [2020] No.31.

Lower CIT rate

Enterprises that (a) are registered in Hainan FTP, (b) have “substantive operations” in Hainan, and (c) with their main business in the encouraged industries in Hainan are entitled to CIT at a reduced rate of 15 percent from January 1, 2020 to December 31, 2024. Likewise, to qualify, the enterprise’s main business must be in the encouraged industries of Hainan, and the income from the enterprise’s main business must constitute 60 percent or more of its total income.

What’s more, during the period from 2025 to 2035, the applicable scope of the lowered CIT rate of 15 percent will be expanded to benefit all Hainan enterprises (only except those in a “negative list” sector), according to the Overall Plan for the Construction of Hainan FTP released by the State Council.

CIT exemption on overseas direct investment income

Enterprises of tourism, modern service, and high-tech sectors registered in Hainan FTP are exempt from paying CIT on income from new overseas direct investment between January 1, 2020 and December 31, 2024.

The tax exemption applies to (a) income from operating profits from newly established overseas branches and (b) dividend income that is a result of new direct investment obtained from overseas subsidiaries in which the Hainan enterprise holds a 20 percent or more equity. Plus, to enjoy the tax exemption, the foreign jurisdiction, where the overseas branch is located or investment is made, must impose a statutory income tax of five percent or more.

Accelerated tax deductions for eligible capital expenditures

Furthermore, Hainan-registered enterprises are allowed to accelerate the pre-tax deduction of the cost of fixed assets (excluding building) or intangible assets that are acquired between January 1, 2020 and December 31, 2024.

• For assets with a unit value no more than RMB 5 million (approx. US$0.77 million), a one-off pre-tax deduction is allowed; and
• For assets with a unit value of more than RMB 5 million (approx. US$0.77 million), accelerated depreciation or amortization is allowed.

This tax treatment in Hainan FTP is quite similar to that provided in Cai Shui [2018] No.54. However, Hainan’s accelerated depreciation/ amortization regime for eligible capital expenditure is more relaxed because the Cai Shui [2018] No.54 (which is applicable nationwide) does not cover intangible assets, but Hainan’s policy covers fixed assets (including those self-constructed and self-developed) and intangible assets. Plus, Cai Shui [2018] No.54 contains more restrictions on fixed assets with a unit value of more than RMB 5 million (approx. US$0.77 million).

CIT reduction for venture capital enterprises

According to the 2021 Guidelines for Venture Capital in Hainan FTP, for venture capital enterprises that are established in Hainan and meet the requirements:

• 70 percent of the investment in small and medium-sized high-tech enterprises and start-up technology enterprises can be deducted from its taxable income; and
• A reduced CIT rate of 15 percent can be enjoyed for income from industries encouraged by Hainan FTP.

CIT incentives offered in Shanghai Lingang New Area

Starting January 1, 2020, enterprises registered in Lingang New Area of Shanghai FTZ may be eligible for a lowered CIT rate of 15 percent for five years since its date of establishment, according to Cai Shui [2020] No.38.

To qualify, the enterprise’s main business must be in four key industries – integrated circuits (IC), artificial intelligence (AI), biomedicine, and civil aviation. And it must engage in substantive production and R&D activities in a sector listed in the Catalogue of Key Fields and Core Links of Lingang New Area.

CIT incentives offered in Shenzhen Qianhai

According to Cai Shui [2021] No.30, from January 1, 2021 to December 31, 2025, qualified enterprises engaged in encouraged business activities in Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone are able to enjoy a reduced CIT rate of 15 percent.

Shenzhen Qianhai encourages businesses in 30 sectors under five broad industry categories – modern logistics, information services, technology services, cultural and creative industries, and commercial services.

CIT incentives offered in Fujian Pingtan

According to Cai Shui [2021] No.29, from January 1, 2021 to December 31, 2025, qualified enterprises engaged in encouraged business activities in Pingtan Comprehensive Experiment Zone of Fujian FTZ are entitled to the reduced 15 percent CIT rate.

Fujian Pingtan currently encourages 146 Industry sectors under five categories – high-tech, consumer services, agricultural and marine industry, ecological and environmental protection, infrastructure management, and tourism.

CIT incentives offered in Zhuhai Hengqin

In May 2022, the MOF and STA released a series of preferential tax policies (Yue Caishui [2022] No. 19) for companies based in and setting up in the Guangdong-Macao In-Depth Cooperation Zone in Hengqin. The following preferential tax policies are implemented retroactively from January 1, 2021, and no expiry date is provided.

Lower CIT rate

Qualified industrial companies located in the Hengqin Cooperation Zone can enjoy a reduced 15 percent CIT rate. To be eligible for this policy, companies must meet the below criteria:

• The main business must be in one of the industries in the Guangdong-Macao In-Depth Cooperation Zone in Hengqin Corporate Income Tax Preferential Catalogue (2021 Edition) and derive at least 60 percent of income from this main business. The catalogue includes 150 sectors across high-tech, science and education R&D, traditional Chinese medicine, tourism, modern services, finance, and more.
• Carry out a “substantive operation”, which means that the actual management of the enterprise is located in the Hengqin Cooperation Zone, and implements substantive and comprehensive management and control over the production and operation, personnel, accounting, property, and other aspects of the company.

For companies that are headquartered in the Hengqin Cooperation Zone, the 15 percent preferential CIT policy only applies to the income derived by the headquarters and any eligible subsidiaries that are also located within the zone. For companies that are headquartered elsewhere, the preferential CIT policy only applies to the eligible subsidiaries that are located within the zone.

Waiver for CIT on new ODI income in tourism, modern services, and high-tech

The income derived from new overseas direct investment (ODI) from companies established in the Hengqin Cooperation Zone in the tourism industry, modern services industry, and the high-tech industry can be exempted from CIT. To be eligible, the income from new ODI must meet the following criteria:

• It is made up of operating profits derived from newly established overseas branches, or dividend income corresponding to the newly increased ODI in the case of repatriation from overseas subsidiaries with a shareholding ratio of 20 percent or above.
• The statutory CIT rate of the country or region in which the overseas subsidiaries are located is no less than 5 percent.

Preferential tax treatment for the purchase of fixed and intangible assets

Newly purchased fixed assets (other than houses and buildings) or intangible assets with a unit value of up to RMB 5 million can be deducted from the taxable income on a one-off basis.

In addition, depreciation and amortization are no longer calculated annually. Companies can shorten the depreciation and amortization period for newly purchased fixed or intangible assets with a unit value of over RMB 5 million, or adopt an accelerated depreciation and amortization method.

CIT incentives offered in Beijing Zhongguancun

CIT exemption on income from qualified technology transfer

Resident enterprises registered in Beijing Zhongguancun National Independent Innovation Demonstration Zone are exempt from CIT on income derived from qualified technology transfer not exceeding RMB 20 million, according to Cai Shui [2020] No.61. In addition, CIT on income from qualified technology transfer exceeding RMB 20 million can be halved.

This tax treatment shares similarities with the STA Announcement [2015] No.82, which allows resident enterprises nationwide to enjoy CIT cuts on income from qualified technology transfer. However, the STA Announcement [2015] No.82 has a smaller tax-free limit of RMB 5 million (approx. US$0.77 million) and a stricter definition of qualified technology transfer.

CIT reduction for venture capital enterprises

Furthermore, according to Cai Shui [2020] No.63, effective from January 1, 2020, for qualified corporate venture capital enterprises (CVCE) in the Demonstration Zone:

• If the gains on the transfer of equity, which has been held for not less than three years, exceeds 50 percent of the total gains on the transfer of equity in a given tax year, a 50 percent exemption for CIT based on the shareholding ratio of individual shareholders at year-end is allowed (CIT Exemption = Shareholding ratio of individual shareholders at year-end x CIT liability for year ÷ 2); and
• If the gains on the transfer of equity, which has been held for not less than five years, exceeds 50 percent of the total gains on the transfer of equity that year, a 100 percent exemption for CIT based on the shareholding ratio of individual shareholders at year-end is allowed (CIT Exemption = Shareholding ratio of individual shareholders at year-end x CIT liability for the year).

Other CIT incentives

As provided below, other projects are also entitled to CIT preferential policies. Investors should consult tax professionals in China for information on the most up-to-date tax incentives available to them.

• CIT incentives for hiring disabled employees: An additional 100 percent deduction of salaries paid to disabled employees on the basis of the actual deduction.
• CIT incentives for hiring retired soldiers: Enterprises that hire retired soldiers with labor contracts of one year and above, could get RMB 6,000 (subject to local variances) per year for each employed soldier in three years period, to deduct VAT, urban construction, and maintenance taxes, education surcharge, local education surcharge, and CIT in turn.
• Tax incentives for enterprises engaging in pollution prevention and control: Qualified resident enterprises engaging in pollution control can enjoy a reduced CIT rate of 15 percent.
• Tax reduction for enterprises investing in seed-stage or start-up technology enterprises: Qualified enterprises making investments to seed-stage or start-up technology enterprises can deduct 70 percent of the investment amount from the taxable income in the year when the equity is held for two years. If the deduction is insufficient in the current year, the remaining deduction may be carried forward in subsequent tax years.

Businesses in China may find its documentation requirements and application procedures burdensome if they are not familiar with the established tax system and eligibility criteria for accessing supportive measures. Seeking professional assistance might be the best choice. To learn more about how to get the most out of China’s preferential tax policies, please contact China@dezshira.com. 

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