Announcement on the Corporate Income Tax Policy for Promoting High-Quality Development of the Integrated Circuit Industry and the Software Industry

In accordance with the requirements set forth in the “Notice of the State Council on Issuing Several Policies for Promoting the High-Quality Development of the Integrated Circuit Industry and the Software Industry in the New Era” (Guofa [2020] No. 8), and to promote the high-quality development of the integrated circuit industry and the software industry, we hereby announce the following regarding relevant corporate income tax policies:

　　 1. Integrated circuit enterprises or projects that the state encourages—those with a linewidth of less than 28 nanometers (inclusive) and an operational period of more than 15 years—are exempt from corporate income tax from the first to the tenth year. For integrated circuit enterprises or projects that the state encourages—those with a linewidth of less than 65 nanometers (inclusive) and an operational period of more than 15 years—their corporate income tax is exempt from the first to the fifth year, and from the sixth to the tenth year, it is levied at half the statutory rate of 25%. For integrated circuit enterprises or projects that the state encourages—those with a linewidth of less than 130 nanometers (inclusive) and an operational period of more than 10 years—their corporate income tax is exempt from the first to the second year, and from the third to the fifth year, it is levied at half the statutory rate of 25%.

　　 For enterprises engaged in integrated circuit production that enjoy tax preferential policies, the preferential period shall be calculated starting from the year in which the enterprise becomes profitable. For projects engaged in integrated circuit production that enjoy tax preferential policies, the preferential period shall be calculated starting from the tax year in which the project generates its first revenue from production and operations. Integrated circuit production projects must maintain separate accounting records, calculate their income independently, and reasonably allocate period expenses.

　　 The list of integrated circuit production enterprises or projects encouraged by the state is formulated jointly by the National Development and Reform Commission, the Ministry of Industry and Information Technology, along with relevant departments such as the Ministry of Finance and the State Administration of Taxation.

　　 II. Integrated circuit production enterprises whose line widths are less than or equal to 130 nanometers, as encouraged by the state, Integrated circuit manufacturing enterprises encouraged by the state Losses incurred in the five tax years preceding the current year that have not yet been fully offset may be carried forward to subsequent years, with the total carryforward period not exceeding 10 years.

　　 3. Integrated circuit design, equipment, materials, packaging, and testing enterprises, as well as software enterprises, that are encouraged by the state shall be exempt from corporate income tax from the first to the second year starting from the year in which they become profitable; from the third to the fifth year, their corporate income tax shall be levied at half the statutory rate of 25%.

　　 The criteria for integrated circuit design, equipment, materials, packaging, and testing enterprises, as well as software enterprises, that are encouraged by the state shall be formulated jointly by the Ministry of Industry and Information Technology together with relevant departments including the National Development and Reform Commission, the Ministry of Finance, and the State Administration of Taxation.

　　 IV. Key integrated circuit design enterprises and software enterprises that are encouraged by the state shall be exempt from corporate income tax from the year they first become profitable through the fifth year, and in subsequent years, corporate income tax will be levied at a reduced rate of 10%.

　　 The list of key integrated circuit design and software enterprises encouraged by the state is formulated jointly by the National Development and Reform Commission, the Ministry of Industry and Information Technology, together with relevant departments such as the Ministry of Finance and the State Administration of Taxation.

　　 Five, Meets the original policy conditions and is in Before 2019 (inclusive) Enterprises or projects that have already entered the preferential period, 2020 From the year (inclusive) You may continue to enjoy the benefits under the original policy provisions until the expiration date. If you also meet the requirements set forth in Articles 1 through 4 of this announcement, you may enjoy the relevant preferential treatments as specified herein. Specifically, for the periodic tax reduction and exemption benefits, the preferential period shall be calculated according to the provisions of this announcement, and you may continue to enjoy the remaining period of the benefit until its expiration date. For enterprises or projects that met the original policy conditions but had not yet entered the preferential period as of 2019 (inclusive), the original policy will no longer apply starting from 2020 (inclusive).

　　 Six If an integrated circuit enterprise or project, or a software enterprise, simultaneously meets the conditions for multiple periodic tax reduction and exemption preferential policies as stipulated in this announcement, the enterprise may choose one of these policies to enjoy the corresponding benefits. For those enterprises that have already entered the preferential period, they may select one of the policies to enjoy the relevant benefits for the remaining duration of the preferential period.

　　 7. For the preferential treatments stipulated in this announcement that are managed through a list, the National Development and Reform Commission and the Ministry of Industry and Information Technology shall, before the end of March each year, provide the Ministry of Finance and the State Administration of Taxation with a list of enterprises and projects eligible for such preferential treatments for the previous year, as prescribed. For those preferential treatments not managed through a list, The tax authority, in accordance with Article 10 of Document No. 49 [2016] issued by the Ministry of Finance and State Administration of Taxation, has forwarded the case to the departments of Development and Reform, as well as Industry and Information Technology, for verification.

　　 Eight, For integrated circuit enterprises or projects, and software enterprises that continue to enjoy preferential treatment under the original policies, the tax authorities shall, in accordance with Article 10 of Cai Shui [2016] No. 49, forward the cases to the departments of Development and Reform and Industry and Information Technology for verification.

　　 Nine, The existing policies referred to in this announcement include: Notice of the Ministry of Finance and the State Administration of Taxation on Further Encouraging the Development of the Software Industry and the Integrated Circuit Industry—Corporate Income Tax Policies (Cai Shui [2012] No. 27), Notice of the Ministry of Finance, the State Administration of Taxation, the National Development and Reform Commission, and the Ministry of Industry and Information Technology on Further Encouraging the Development of the Integrated Circuit Industry—Corporate Income Tax Policies (Cai Shui [2015] No. 6), Notice of the Ministry of Finance, the State Administration of Taxation, the National Development and Reform Commission, and the Ministry of Industry and Information Technology on Issues Concerning Preferential Corporate Income Tax Policies for Enterprises in the Software and Integrated Circuit Industries (Cai Shui [2016] No. 49), Notice of the Ministry of Finance, the State Administration of Taxation, the National Development and Reform Commission, and the Ministry of Industry and Information Technology on Issues Relating to Corporate Income Tax Policies for Integrated Circuit Production Enterprises (Cai Shui [2018] No. 27), Announcement of the Ministry of Finance and the State Administration of Taxation on Corporate Income Tax Policies for Integrated Circuit Design and Software Enterprises (Announcement of the Ministry of Finance and the State Administration of Taxation No. 68 of 2019), and Announcement of the Ministry of Finance and the State Administration of Taxation on the Policies Applicable to the Annual Corporate Income Tax Filing and Settlement for Integrated Circuit Design Enterprises and Software Enterprises for the Year 2019 (Announcement of the Ministry of Finance and the State Administration of Taxation No. 29 of 2020).

　　 10. This notice shall take effect from January 1, 2020. The provision in Article 2 of Cai Shui [2012] No. 27, stating that “after being recognized, the enterprise income tax shall be levied at a reduced rate of 15%,” and Article 4, which stipulates that “key software enterprises and integrated circuit design enterprises within the national planning and layout, if they have not enjoyed tax exemptions in the current year, may be subject to a reduced tax rate of…” 10% The tax rate for corporate income tax will also be suspended.

Ministry of Finance, State Administration of Taxation, National Development and Reform Commission, Ministry of Industry and Information Technology

December 11, 2020