PRC Corporate Income Tax Law
47
No.Name of Issuances Relevant policy contents
27
The State Council Regulations on Encouraging the
Investment in, and the Development in Hainan Island
(Guofa [1988] No. 26)
Enterprises that were established on Hainan Island
(except state banks and insurance companies), and that
were engaged in the development and operation of
infrastructure such as ports, wharfs, airports, highways,
railways, power stations, coal mines, water supplies, etc.,
and in agricultural development and operations, where
their operating periods were 15 years or more, were
exempt from income tax from the first through the fifth
years starting from the first profitable year, and were
subject to 50% of the applicable income tax rates in the
sixth through the tenth years.
28
Enterprises that were established on Hainan Island
(except state banks and insurance companies), and that
were engaged in industry and transportation, where their
operating periods were 10 years or more, were exempt
from income tax in the first and the second years starting
from the first profitable year, and were subject to 50% of
the applicable tax rates in the third to the fifth years.
29
Enterprises that were established on Hainan Island
(except state banks and insurance companies), and that
were engaged in service industries, where the total
investment exceeded USD 5 million or RMB 20 million
and the operating period was 10 years or more, were
exempt from income tax in the first profitable year, and
were subject to 50% of the applicable tax rates in the
second and the third years.
30
Circular of the State Council on Several Supporting
Policies for Implementing the National Outlines of
Medium and Long-Range Scientific and Technological
Development (2006-2020) (Guofa [2006] No. 6)
The newly established high-tech enterprises in national
Advanced and New Technology Industrial Development
Zones, upon completing the strict recognition process,
were exempt from income tax for two years starting from
the first profitable year.
. 2008 KPMG Huazhen, a Sino-foreign joint venture in the People’s Republic of China and a member firm of the KPMG network of independent
member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.
48
PRC Corporate Income Tax Law
State Council Notice 40
State Council
Notice on the Implementation of the Transitional Preferential Tax Treatment
for Advanced and New Technology Enterprises Newly Established
in the Special Economic Zones and the Shanghai Pudong New Area
Guofa [2007] No. 40
Issued on: 26 December 2007
The People’s Governments of all Provinces, Autonomous Regions and Municipalities
under the direct jurisdiction of the Central Government, all Ministries and Commissions
of the State Council, and all institutions under the direct supervision of the State
Council:
According to Article 57 of the Corporate Income Tax (CIT) Law of the People’s Republic
of China, the State Council decides to implement transitional preferential tax treatments
for Advanced and New Technology Enterprises that require the key support of the
State and that are newly established in legally designated areas for developing foreign
economic cooperation and technological exchanges and in areas where the State
Council has determined that the special policies in the aforementioned areas are
applicable. Some of the relevant issues are hereby addressed as follows:
1.
The legally designated areas for developing foreign economic cooperation and
technological exchanges refer to Shenzhen, Zhuhai, Shantou, Xiamen and Hainan
Special Economic Zone; areas where the State Council has determined that the
special policies in the aforementioned areas are applicable refer to the Shanghai
Pudong New Area.
2. For Advanced and New Technology Enterprises that complete the registration in the
Special Economic Zones and the Shanghai Pudong New Area on or after 1 January
2008 and that require the key support of the State (hereinafter referred to as the
“Newly Established Advanced and New Technology Enterprises”), income derived
from within the Special Economic Zones and the Shanghai Pudong New Area shall,
starting from the tax year during which revenue from production and business
operations is first derived, be exempt from CIT in the first and the second years, and
be subject to 50% of the prescribed tax rate of 25% in the third through the fifth
years.
The Advanced and New Technology Enterprises that require the key support of
the State refer to the Advanced and New Technology Enterprises that own core,
proprietary intellectual property rights, that satisfy the requirements prescribed
under Article 93 of The Implementation Rules for the Corporate Income Tax Law
of the People's Republic of China, and are recognised as such pursuant to the
Administrative Measures for the Recognition of Advanced and New Technology
Enterprises.
. 2008 KPMG Huazhen, a Sino-foreign joint venture in the People’s Republic of China and a member firm of the KPMG network of independent
member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.
PRC Corporate Income Tax Law
49
3. Where a Newly Established Advanced and New Technology Enterprise in a Special
Economic Zone or the Shanghai Pudong New Area is engaged in production and
business operations outside the Special Economic Zone or the Shanghai Pudong
New Area, the enterprise shall separately calculate its income derived from within
the Special Economic Zone or the Shanghai Pudong New Area, and shall reasonably
allocate its expenses for the corresponding period; where the enterprise does not
conduct a separate calculation, it shall not enjoy preferential CIT treatment.
4. Where, during the period when an Advanced and New Technology Enterprise enjoys
the transitional preferential tax treatments according to this Notice, the enterprise
no longer qualifies as an Advanced and New Technology Enterprise based upon a
review or a random assessment, the enterprise shall cease to enjoy the transitional
preferential tax treatments starting from the year during which the enterprise
no longer qualifies as an Advanced and New Technology Enterprise; where the
enterprise is subsequently recognised again as an Advanced and New Technology
Enterprise, it shall not resume or restart its enjoyment of the transitional preferential
tax treatments.
5. This Notice shall take effect 1 January 2008.
State Council
26 December 2007
. 2008 KPMG Huazhen, a Sino-foreign joint venture in the People’s Republic of China and a member firm of the KPMG network of independent
member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.
www.kpmg.com.cn
www.kpmg.com.hk
. 2008 KPMG Huazhen, a Sino-foreign joint
venture in the People s Republic of China
and a member firm of the KPMG network of
independent member firms affiliated with KPMG
International, a Swiss cooperative. All rights
reserved. Printed in the People s Republic of
China.
KPMG and the KPMG logo are registered
trademarks of KPMG International, a Swiss
cooperative. Publication date: January 2008
The information contained herein is of a general nature and is not intended to address the circumstances of
any particular individual or entity. Although we endeavour to provide accurate and timely information, there
can be no guarantee that such information is accurate as of the date it is received or that it will continue to
be accurate in the future. No one should act upon such information without appropriate professional advice
after a thorough examination of the particular situation.
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