Notice of the State Council on Issuing Several Policies to Further Encourage the Development of the Software Industry and the Integrated Circuit Industry

　　National Development Document No. 4 (2011)

　　People's Governments of all provinces, autonomous regions, and municipalities directly under the central government; all ministries and commissions of the State Council and their directly affiliated institutions:

　　We are now issuing to you the “Several Policies for Further Encouraging the Development of the Software Industry and the Integrated Circuit Industry.” Please ensure thorough implementation.

　　The software industry and the integrated circuit industry are strategic emerging industries of national importance and serve as a vital foundation for the informatization of the national economy and society. In recent years, with the support of a series of national policies and measures and through the concerted efforts of all parties involved, China’s software industry and integrated circuit industry have achieved relatively rapid development. The formulation and implementation of the “Several Policies to Further Encourage the Development of the Software Industry and the Integrated Circuit Industry” will continue to refine incentive measures, clarify policy orientations, and play an important role in optimizing the industrial development environment, enhancing scientific and technological innovation capabilities, and improving the quality and level of industrial development. All regions and relevant departments should attach great importance to this initiative, strengthen organizational leadership and coordination, promptly develop detailed implementation rules and supporting measures, and ensure effective implementation. The National Development and Reform Commission, together with relevant departments, should closely monitor and promptly assess the implementation of these policies, intensify supervision and guidance, and ensure that tangible results are achieved.

　　State Council

　　January 28, 2011

　　Further encourage the software industry and

　　Several Policies for the Development of the Integrated Circuit Industry

　　Since the issuance of the “Notice of the State Council on Promulgating Several Policies to Encourage the Development of the Software Industry and the Integrated Circuit Industry” (Guofa [2000] No. 18, hereinafter referred to as Document No. 18), China’s software industry and integrated circuit industry have experienced rapid development, with their industrial scale expanding swiftly and their technological levels significantly improving, thereby strongly promoting the country’s informatization drive. However, compared with internationally advanced levels, China’s software industry and integrated circuit industry still face such challenges as a relatively weak developmental foundation, insufficient scientific and technological innovation capabilities and self-development capacity among enterprises, an urgent need to enhance application development levels, and an incomplete industrial chain. To further optimize the development environment for the software industry and the integrated circuit industry, improve the quality and level of industrial development, and foster a group of strong and influential industry-leading enterprises, the following policies are hereby formulated.

　　I. Fiscal and Tax Policies

　　(1) Continue implementing the preferential value-added tax policy for software.

　　(2) Further implement and refine the relevant preferential policies for business tax. Software enterprises and integrated circuit design enterprises that meet the specified conditions and engage in software development and testing, information system integration, consulting, operation and maintenance, as well as integrated circuit design, shall be exempt from business tax, and the related procedures shall be simplified. Specific measures will be formulated jointly by the Ministry of Finance, the State Administration of Taxation, and other relevant departments.

　　(3) For integrated circuit enterprises whose line width is less than or equal to 0.8 microns, upon certification, from the year in which they first become profitable, corporate income tax will be exempted for the first and second years, and for the third through fifth years, it will be levied at half the statutory rate of 25% (hereinafter referred to as the “two exemptions and three half reductions” preferential policy for corporate income tax).

　　(4) For integrated circuit enterprises whose line width is less than 0.25 microns or whose investment exceeds 8 billion yuan, upon certification, the enterprise income tax shall be levied at a reduced rate of 15%. Among these enterprises, those with an operating period of more than 15 years shall be exempt from enterprise income tax from the first to the fifth year starting from the year they begin to make profits; from the sixth to the tenth year, the enterprise income tax shall be levied at half the statutory rate of 25% (hereinafter referred to as the “Five-Year Exemption and Five-Year Half-Reduction” preferential policy for enterprise income tax).

　　(5) For major integrated circuit projects approved by the state, where the value-added tax input tax incurred due to centralized procurement results in a short-term inability to offset and thus ties up capital, special measures shall be adopted to address this issue appropriately. The specific measures shall be formulated jointly by the Ministry of Finance and relevant departments.

　　(6) Newly established integrated circuit design enterprises and qualified software enterprises within China, upon certification, shall enjoy the “two-year exemption and three-year half-rate reduction” preferential corporate income tax policy starting from the year they begin to make profits. Imported materials and components of certified integrated circuit design enterprises and qualified software enterprises, provided they comply with current laws and regulations, may benefit from bonded zone policies.

　　(7) Integrated circuit design enterprises within the national planning and layout, provided they meet the relevant conditions, may enjoy the income tax preferential policies for key software enterprises within the national planning and layout, by analogy with Document No. 18 issued by the State Council. The specific implementation measures shall be formulated jointly by the National Development and Reform Commission and relevant departments.

　　(8) To enhance the integrated circuit industry chain, enterprises engaged in integrated circuit packaging, testing, and key specialized materials, as well as enterprises involved in specialized equipment for integrated circuits, that meet the relevant eligibility criteria will be granted preferential corporate income tax treatment. Specific implementation measures will be formulated jointly by the Ministry of Finance and the State Administration of Taxation together with other relevant departments.

　　(9) The income tax preferential policies implemented by the state for integrated circuit enterprises shall be dynamically adjusted according to the progress of industrial and technological advancements. Software enterprises and integrated circuit enterprises that meet the eligibility criteria shall enjoy the “two-year exemption and three-year half-rate” or “five-year exemption and five-year half-rate” corporate income tax preferential policies. The preferential period shall be calculated from the year in which the enterprise first becomes profitable, and such preferential treatment shall continue until the expiration date, provided that the enterprise remains eligible. If the corporate income tax preferential policies applicable to eligible software enterprises and integrated circuit enterprises overlap with other corporate income tax preferential policies, the enterprise may choose the most favorable policy to apply and shall not stack multiple preferential treatments.

　　II. Investment and Financing Policies

　　(10) The state provides strong support for the construction of key software and integrated circuit projects. For integrated circuit enterprises that meet the eligibility criteria, appropriate investment support from the central budget will be provided for their technological advancement and technical renovation projects. Software enterprises are encouraged to strengthen their capacity building in comprehensive technology development.

　　(11) The state encourages and supports software enterprises and integrated circuit enterprises in strengthening the integration of industrial resources. For cross-regional restructuring and mergers & acquisitions undertaken by software enterprises and integrated circuit enterprises to achieve resource integration and grow stronger, relevant departments of the State Council and local governments at all levels shall actively provide support and guidance, and prevent the establishment of barriers of any kind.

　　(12) Through existing channels such as venture investment guidance funds and other financial and policy mechanisms, guide social capital to establish venture investment funds that support the entrepreneurship of small- and medium-sized software enterprises and integrated circuit enterprises. Local governments with appropriate conditions may, in accordance with relevant national regulations, set up equity investment funds or venture investment funds primarily aimed at supporting the development of software enterprises and integrated circuit enterprises, thereby guiding social capital to invest in the software and integrated circuit industries. Actively support qualified software enterprises and integrated circuit enterprises in raising funds through various means, including issuing stocks and bonds, thus broadening their direct financing channels.

　　(13) Support and guide local governments in establishing loan risk compensation mechanisms, improve the intellectual property pledge registration system, and actively encourage software enterprises and integrated circuit enterprises to use intangible assets such as intellectual property rights for pledge loans. Fully leverage the role of financing guarantee institutions and financing guarantee subsidy funds, and proactively provide various forms of loan guarantee services to small- and medium-sized software enterprises and integrated circuit enterprises.

　　(14) Within the scope of their approved business activities, policy-based financial institutions may give priority support to software and integrated circuit projects that meet the criteria and fall within the scope of major national science and technology programs.

　　(15) Commercial financial institutions should further enhance their financial services, actively innovate credit products tailored to the development of the software and integrated circuit industries, and provide financing support to software enterprises and integrated circuit enterprises that meet the eligibility criteria.

　　III. Research and Development Policy

　　(Sixteen) Fully leverage diverse funding channels and further intensify support for scientific and technological innovation. Give full play to the guiding role of major national science and technology programs, vigorously support R&D in critical core technologies for software and integrated circuits, strive to achieve comprehensive breakthroughs in key technologies, and accelerate the industrialization and widespread application of technologies with independent intellectual property rights. Closely focus on the goal of fostering strategic emerging industries, giving priority support to R&D in foundational software, high-end software geared toward next-generation information networks, industrial software, software related to digital content, advanced chips, integrated circuit equipment and process technologies, key materials for integrated circuits, critical application systems, and the formulation of important technical standards. The Ministry of Science and Technology, the National Development and Reform Commission, the Ministry of Finance, the Ministry of Industry and Information Technology, and other relevant departments shall ensure the effective organization and implementation of these special programs.

　　(17) In areas such as basic software, high-performance computing and general-purpose computing platforms, integrated circuit process R&D, key materials, critical application software, and chip design, we will promote the establishment of national key laboratories, national engineering laboratories, national engineering centers, and enterprise technology centers. Relevant departments should give priority to allocating R&D projects. We encourage software companies and integrated circuit enterprises to establish industry-academia-research-application-oriented strategic alliances for technological innovation, thereby fostering coordinated development across the entire industrial chain.

　　(18) Encourage software enterprises to vigorously develop software testing and evaluation technologies, refine relevant standards, enhance software R&D capabilities, improve software quality, strengthen brand building, and boost product competitiveness.

　　IV. Import and Export Policies

　　(19) For software enterprises and integrated circuit design enterprises that need to temporarily import self-used equipment (including development and testing equipment, software and hardware environments, prototypes and components, and electronic components), upon confirmation by the municipal-level commerce authorities, they may apply to customs for supervision as temporarily imported goods. The import taxes applicable shall be governed by current regulations. For software enterprises and integrated circuit enterprises meeting the relevant criteria, the quality inspection authorities may provide advance appointment services for inspection; customs, based on the enterprises’ requests, may offer advance appointment services for customs clearance.

　　(20) For software export contracts signed between software enterprises and foreign enterprises with high credit ratings, policy-based financial institutions may, in accordance with the principles of independent loan review and controllable risks, provide financing and insurance support within the scope of their approved business activities.

　　(21) Support enterprises in “going global” to establish overseas marketing networks and R&D centers, and promote exports of integrated circuits, software, and information services. Vigorously develop international service outsourcing business. The Ministry of Commerce, together with relevant departments, should establish long-term cooperation mechanisms with key countries and regions and adopt comprehensive measures to create favorable conditions for enterprises to expand into emerging markets.

　　V. Talent Policy

　　(22) Accelerate the refinement of incentive mechanisms in various forms, including options, technology equity participation, equity ownership, and dividend rights, to fully harness the enthusiasm and creativity of R&D personnel and management staff. Governments at all levels may award substantial rewards to senior software and integrated circuit professionals who have made outstanding contributions. For software and integrated circuit talents recruited by industry bases (parks) approved by relevant national authorities, as well as by university software and microelectronics colleges, priority shall be given to arranging household registration for the talents themselves, their spouses, and minor children in the locality where they are employed. Strengthen the management of the talent market and actively provide services to assist software and integrated circuit enterprises in recruiting talent.

　　(23) Higher education institutions should further deepen reform and strengthen the development of software engineering and microelectronics programs. They should closely align curriculum design, teaching plans, and teaching methods with the actual needs of industrial development, and strive to cultivate internationally-minded, multidisciplinary, and practical talents. Efforts should also be made to enhance the faculty, teaching laboratories, and internship and training bases for software engineering and microelectronics programs. The Ministry of Education, together with relevant departments, should step up supervision and guidance in this regard.

　　(24) Encourage higher education institutions with the necessary conditions to establish microelectronics colleges through joint educational initiatives with integrated circuit enterprises. Demonstration microelectronics colleges approved for establishment may enjoy the same policies and benefits as demonstration software colleges. Support the establishment of comprehensive talent training and practice bases that integrate universities and enterprises. Also, support demonstration software colleges and microelectronics colleges in collaborating with internationally renowned universities and multinational corporations to attract overseas faculty and high-quality resources, and jointly cultivate talents in software and integrated circuits.

　　(25) In accordance with the relevant requirements for attracting high-level overseas talent, accelerate the recruitment of high-level software and integrated circuit professionals from abroad and ensure the effective implementation of related policies. Develop and implement annual plans for the recruitment of software and integrated circuit talent as well as for overseas training programs. Successfully operate the National International Training Base for Software and Integrated Circuit Talent, and actively explore and establish additional channels for overseas training.

　　VI. Intellectual Property Policy

　　(26) Encourage software enterprises to register their copyrights. Support software and integrated circuit enterprises in legally applying for intellectual property rights abroad; those meeting relevant regulations may apply for financial support. Increase the intensity of policy support and vigorously develop the intellectual property services industry.

　　(27) Strictly implement the intellectual property protection system for software and integrated circuits, and crack down on all types of infringement activities in accordance with the law. Strengthen protection of software copyrights and proprietary rights to integrated circuit layout designs in the online environment, actively develop and apply technologies for protecting online copyrights of genuine software, and effectively safeguard the intellectual property rights of software and integrated circuits.

　　(28) Further advance the work of promoting genuine software and explore the establishment of a long-term mechanism. All computers sold within China—whether large-scale computers, servers, microcomputers, or laptops—must come pre-installed with genuine software; the sale of computers pre-installed with non-genuine software is strictly prohibited. Fully implement government policies and measures for the use of genuine software in government agencies, incorporate software procurement funds into the fiscal budget, adopt centralized government procurement for commonly used software, and strengthen the management of software assets. Vigorously encourage enterprises and the general public to use genuine software.

　　VII. Market Policies

　　(29) Actively guide enterprises to outsource their information technology R&D and application services to specialized companies. Encourage government departments to entrust routine tasks in e-government development and data processing to professional software and information service enterprises through the procurement of services. Relevant authorities should promptly establish and refine corresponding security review and confidentiality management regulations.

　　Encourage large and medium-sized enterprises to spin off their information technology R&D and application business units, establishing specialized software and information service companies that can provide services to the entire industry and society at large.

　　(30) Further standardize the market order for software and integrated circuits, strengthen anti-monopoly efforts, and crack down—according to law—on all forms of abuse of intellectual property rights that exclude or restrict competition, as well as on unfair competitive practices involving the abuse of dominant market positions. Fully leverage the role of industry associations to create a favorable environment for industrial development. Accelerate the formulation of relevant technical and service standards, promote fair competition in the software market, and safeguard the legitimate rights and interests of consumers.

　　(31) Improve the system for protecting consumer privacy and corporate secrets in the online environment, and promote the network-based development of software and information services. Gradually roll out software products that meet security requirements to government agencies and public institutions at all levels.

　　VIII. Policy Implementation

　　(32) All software enterprises and integrated circuit enterprises established within the territory of China that meet the relevant eligibility criteria—regardless of their ownership structure—may benefit from this policy.

　　(33) Continue to implement the policies specified in Document No. 18 issued by the State Council. In case of any inconsistency between these policies and the present policy, the present policy shall prevail. The Development and Reform Commission, together with the Ministry of Finance, the State Administration of Taxation, the Ministry of Industry and Information Technology, the Ministry of Commerce, the General Administration of Customs, and other relevant departments, shall be responsible for interpreting this policy.

　　(34) This policy shall take effect from the date of its publication.