The Implementation Rules for the Corporate Income Tax Law of the People’s - 张志晓律师的日志

PRC Corporate Income Tax Law

No.Name of Issuances Relevant policy contents

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.

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.

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.

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

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:

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

PRC Corporate Income Tax Law

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

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venture in the People s Republic of China

and a member firm of the KPMG network of

independent member firms affiliated with KPMG

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cooperative. Publication date: January 2008

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