State Taxation Administration Announcement No.24 of 2017

 To implement the enterprise income tax incentives for high-tech enterprises, in accordance with Circular of the Ministry of Science and Technology, the Ministry of Finance, and the State Taxation Administration on the Revision and Issuance of the Administrative Measures for the Recognition of High-Tech Enterprises (Guokefahuo [2016] No.32, hereinafter referred to as Recognition Measures) and Circular of the Ministry of Science and Technology, the Ministry of Finance, and the State Taxation Administration on the Revision and Issuance of the Work Guidelines for the Administration of High-Tech Enterprise Recognition (Guokefahuo [2016] No.195, hereinafter referred to as Work Guidelines), as well as relevant tax regulations, the issues with respect to the implementation of the enterprise income tax incentives for high-tech enterprises are hereby announced as follows:

1. After obtaining the qualification of a high-tech enterprise, the enterprise shall file and enjoy the tax preferences from the year when the certificate of a high-tech enterprise is issued, and shall complete the filing procedures with the tax authority in charge as required.

In the year when the enterprise’s qualification as a high-tech enterprise expires, before re-recognition, its enterprise income tax shall be prepaid at a temporary rate of 15 percent. If it still fails to obtain the qualification of a high-tech enterprise by the end of the year, the enterprise shall make a supplementary payment of the tax for the corresponding period in accordance with the regulations.

2. For high-tech enterprises that have been granted the qualification and are enjoying the tax preferences, if the tax authority discover, during routine management, that the enterprises do not meet the recognition criteria stipulated in Article 11 of Recognition Measures either during the process of recognition or when they are enjoying the preferences, the tax authority shall request to the recognition agency for review. Where confirmed that an enterprise does not meet the recognition criteria after the review, the recognition agency shall revoke its high-tech enterprise status, and tell the tax authority to recover the tax benefits the enterprise has enjoyed during the validity period of the enterprise’s certificate, starting from the year in which the enterprise ceased to meet the recognition criteria.

3. High-tech enterprises enjoying tax preferences, in accordance with the provisions of the Announcement of the State Taxation Administration on the Issuance of Methods for Handling Enterprise Income Tax Incentive Matters (State Taxation Administration Announcement No.76 of 2015), shall complete the filing procedures by submitting the enterprise income tax preference matters recordation form and the certificate of high-tech enterprise qualification to the tax authority when conducting the annual reconciliation of the enterprise income tax, and properly keep the following materials for future inquiry:

a. Certificate of high-tech enterprise qualification;

b. Materials for being recognized as a high-tech enterprise;

c. Materials related to intellectual property rights;

d. An explanation stating that the technology playing a core supporting role in the main products (services) of the year falls within the scope specified by National Key Supported High-Tech Areas, and materials detailing the high-tech products (services) and the associated revenues;

e. Annual proof materials regarding employees and the scientific and technical personnel;

f. Total research and development (R&D) expenses along with their respective ratios to sales revenue for the current year and the two preceding accounting years, R&D expenses management materials, and the R&D expenses subsidiary ledger, and the schedule of R&D expenses (Please refer to Annex 2 of Work Guidelines for the specific format);

g. Other materials required by provincial tax authorities.

4. This Announcement applies to the annual reconciliation of enterprise income tax for the year 2017 and the subsequent years. This Announcement shall apply to the high-tech enterprises that have been recognized in accordance with the Recognition Measures after January 1, 2016. For high-tech enterprises recognized in accordance with Circular of the Ministry of Science and Technology, the Ministry of Finance, and the State Taxation Administration on Issuing Administrative Measures for the Recognition of High-Tech Enterprises (Guokefahuo [2008] No.172) before January 1, 2016, Circular of the State Taxation Administration on Issues Related to the Implementation of Enterprise Income Tax Incentives for High-Tech Enterprises (Guoshuihan [2009] No.203) and State Taxation Administration Announcement No.76 of 2015 shall still be applicable.

Announcement of the State Taxation Administration on Enterprise Income Tax Prepayment Issues During the High-Tech Enterprise Qualification Review Period (State Taxation Administration Announcement No.4 of 2011) is simultaneously repealed.

It is hereby announced.

State Taxation Administration

                                                         June 19, 2017

All information in this document is authentic in Chinese. English is provided for reference only. In case of any discrepancy, the Chinese version shall prevail.