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Preferential tax policies

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  • Updated: May 30, 2018

Since January 2008, the Chinese government has been implementing the new Enterprise Income Tax Law, unifying preferential tax policies and adopting a new tax preference regime in which industrial preference is the main emphasis and regional preference is supplementary.

For enterprises engaged in such industries as high and new technology, infrastructure, agriculture, forestry, animal husbandry and fishery, environmental protection, and safety production, preferential tax policies are provided, including the following:

1) high-tech enterprises enjoy a preferential tax rate of 15 percent;

2) small thin-profit enterprises enjoy a preferential tax rate of 20 percent;

3) foreign-invested enterprises located in the western region that are engaged in the encouraged industries of the state enjoy a preferential tax rate of 15 percent;

4) for the income generated from investment in and business operations of important public infrastructure projects supported by the State, from the tax year they obtain their first income of production and operation enterprises enjoy a three-year tax reduction and a two-year tax exemption;

5) enterprises engaged in agriculture, forestry, animal husbandry and fishery industries can enjoy a reduction of or exemption from corporate income tax;

6) enterprises' equipment procurement and investment in environmental protection, energy and water conservation and safe production can be deducted from taxable income;

7) enterprises' expenditures for research and development enjoy an additional deduction of 50 percent of R & D expenditures on the basis of the actual deductions; where intangible assets have been capitalized, they are amortized at 150 percent of the cost of the intangible assets;

8) the first 5 million yuan of taxable income earned by an enterprise from technological transfer in a tax year is exempted from corporate income tax, and taxable income in excess of 5 million yuan is taxed at a 50 percent reduced rate;

9) the newly established high-tech enterprises in the five Special Economic Zones and Shanghai Pudong New Area, from the tax year they obtain their first income of production and operation, enjoy three-year tax reduction and two-year tax exemption treatment;

10) venture investment enterprises engaging in venture investments may deduct a certain proportion of the investment from taxable income.

If an enterprise was set up and enjoyed low tax rates upon approval before the promulgation of the present Law, it can gradually transfer to the tax rate as prescribed in the present Law within five years as of the promulgation of the present Law; if an enterprise enjoys preferential tax treatment for a fixed term, after the promulgation of the new Law it can continue to enjoy such treatment until the fixed term expires.

*Foreign-invested enterprises can also enjoy regional preferential tax policies. In addition to the policies stated above, the enterprises can settle in the areas with additional preferential tax policies, such as the China (Shanghai) Pilot Free Trade Zone, as a (new) company or a branch. For more details, please refer to the official website of the development area.

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