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China (People's Republic): tax incentives for software and integrated circuits enterprises clarified

The Ministry of Finance, the State Administration of Taxation, the National Development and Reform Commission and the Ministry of Industry and Information Technology jointly issued a notice on 4 May 2016 (Cai Shui [2016] No. 49) clarifying the tax incentives for enterprises engaged in software and integrated circuits (IC).

In addition, on 16 May 2016, those four government departments jointly issued another notice (Fa Gai Gao Ji [2016] No. 1056) clarifying the requirements in respect of key software and IC design for enterprises to be eligible for the incentives specified by Cai Shui [2016] No. 49.

Both notices apply from 1 January 2015, their main content being summarized below.

Prior approval is no longer required for software and IC enterprises eligible for the tax incentives stipulated by Cai Shui [2012] No. 27.

However, qualifying enterprises are required to submit relevant documents to the tax authorities as part of their final annual tax settlements.

Based on notice Cai Shui [2012] No. 27, notice Cai Shui [2016] No. 49 clarifies the requirements for the following enterprises to be eligible for the tax incentives:

  • Enterprises engaged in manufacturing IC.
  • Enterprises engaged in designing IC
  • Software enterprises
  • Key software enterprises designated by the state

Based on notice Cai Shui [2016] No. 49, notice Fa Gai Gao Ji [2016] No. 1056 defines which businesses are regarded as key software and key IC design enterprises being eligible for tax incentives.

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