Announcement by the Ministry of Industry and Information Technology of the People’s Republic of China, the National Development and Reform Commission, the Ministry of Finance, and the State Administration of Taxation

No. 9 of 2021

In accordance with 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, hereinafter referred to as the “Several Policies”) and its accompanying tax policies, we hereby announce the eligibility criteria for integrated circuit design, equipment, materials, packaging, and testing enterprises that are encouraged by the state, as referred to in Article 2 of the “Several Policies”:

1. The integrated circuit design enterprises encouraged by the state as referred to in the “Several Policies” must simultaneously meet the following conditions:

（一）在中国境内（不包括港、澳、台地区）依法设立，从事集成电路设计、电子设计自动化（EDA）工具开发或知识产权（IP）核设计并具有独立法人资格的企业；

(2) In the tax filing and settlement year, the enterprise must have an average monthly workforce of no fewer than 20 employees who are either under labor contract relationships or under labor dispatch or employment arrangements. Among these employees, those with a bachelor’s degree or higher must account for at least 50% of the enterprise’s average monthly total workforce, and the average monthly number of research and development personnel must account for at least 40% of the enterprise’s average monthly total workforce.

(3) The total amount of research and development expenses for the tax reconciliation and final settlement year shall account for no less than 6% of the enterprise’s total sales (operating) revenue (the sum of revenue from principal business and other business revenues; the same applies hereinafter).

(4) In the tax reconciliation and final settlement year, the proportion of sales (operating) revenue from integrated circuit design (including EDA tools, IP, and design services; the same applies hereinafter) to the enterprise’s total revenue shall be no less than 60%, of which the proportion of sales (operating) revenue from independently designed products shall be no less than 50%. Furthermore, the enterprise’s total revenue shall be no less than (inclusive of) 15 million yuan.

(5) Possess core key technologies and intellectual property rights belonging to the enterprise itself; the enterprise shall hold a total of no fewer than 8 authorized invention patents, registered layout designs, and copyrights on computer software related to integrated circuit product design.

(6) Possess a development environment and business premises equipped with software and hardware facilities suitable for integrated circuit design, and must use genuine EDA and other software and hardware tools.

(7) During the tax reconciliation and final settlement year, no serious acts of dishonesty, major safety incidents, major quality accidents, or serious environmental violations occurred.

II. The integrated circuit equipment enterprises encouraged by the state as referred to in the “Several Policies” must simultaneously meet the following conditions:

（一）在中国境内（不包括港、澳、台地区）依法设立，从事集成电路专用装备或关键零部件研发、制造并具有独立法人资格的企业；

(2) In the tax reconciliation and final settlement year, the proportion of employees with a labor contract relationship or a labor dispatch/employment relationship and holding an associate degree or higher, averaged monthly, shall account for no less than 40% of the enterprise’s total average monthly number of employees for that year; furthermore, the proportion of research and development personnel, averaged monthly, shall account for no less than 20% of the enterprise’s total average monthly number of employees for that year.

(3) For the tax reconciliation and final settlement year, the total amount of expenditures on research and development of integrated circuit equipment or key components shall account for no less than 5% of the enterprise’s total sales (operating) revenue.

(4) In the tax reconciliation and final settlement year, the proportion of sales revenue from integrated circuit equipment or key components to the enterprise’s total sales (operating) revenue shall be no less than 30%, and the enterprise’s total sales (operating) revenue shall be no less than RMB 15 million (inclusive).

(5) Possess core key technologies and intellectual property rights belonging to the enterprise itself; the enterprise shall hold no fewer than 5 authorized invention patents related to the research and development and manufacturing of integrated circuit equipment or critical components.

(6) Possess the basic conditions—such as business premises and software and hardware facilities—that are suitable for the production of integrated circuit equipment or key components;

(7) During the tax reconciliation and final settlement year, no serious acts of dishonesty, major safety incidents, major quality accidents, or serious environmental violations occurred.

3. The integrated circuit material enterprises encouraged by the state as referred to in the “Several Policies” must simultaneously meet the following conditions:

（一）在中国境内（不包括港、澳、台地区）依法设立，从事集成电路专用材料研发、生产并具有独立法人资格的企业；

(2) In the tax reconciliation and final settlement year, the proportion of monthly average employees with labor contracts or temporary staffing/employment relationships and holding a college diploma or higher shall account for no less than 40% of the enterprise’s total monthly average number of employees for that year; furthermore, the monthly average number of R&D personnel shall account for no less than 15% of the enterprise’s total monthly average number of employees for that year.

(3) In the tax reconciliation and final settlement year, the total amount of expenditures on research and development of integrated circuit materials shall account for no less than 5% of the enterprise’s total sales (operating) revenue.

(4) In the tax reconciliation and final settlement year, the proportion of sales revenue from integrated circuit materials to the enterprise’s total sales (operating) revenue shall be no less than 30%, and the enterprise’s total sales (operating) revenue shall be no less than RMB 10 million (inclusive).

(5) Possess core key technologies and intellectual property rights belonging to the enterprise itself, and have no fewer than 5 authorized invention patents related to the research and development and production of integrated circuit materials.

(6) Possess the basic conditions, such as business premises and software and hardware facilities, that are suitable for the production of integrated circuit materials;

(7) During the tax reconciliation and final settlement year, no serious acts of dishonesty, major safety incidents, major quality accidents, or serious environmental violations occurred.

4. The integrated circuit packaging and testing enterprises encouraged by the state as referred to in the “Several Policies” must simultaneously meet the following conditions:

（一）在中国境内（不包括港、澳、台地区）依法设立，从事集成电路封装、测试并具有独立法人资格的企业；

(2) In the tax reconciliation and final settlement year, the proportion of monthly average employees with a labor contract relationship or a labor dispatch/employment relationship and holding at least an associate’s degree shall be no less than 40% of the enterprise’s total monthly average number of employees for that year; furthermore, the proportion of monthly average research and development personnel shall be no less than 15% of the enterprise’s total monthly average number of employees for that year.

(3) The total amount of research and development expenses for the tax reconciliation and final settlement year shall account for no less than 3% of the enterprise’s total sales (operating) revenue.

(4) In the tax reconciliation and final settlement year, the proportion of revenue from integrated circuit packaging and testing sales (revenue) to the enterprise’s total revenue shall be no less than 60%, and the enterprise’s total revenue shall be no less than RMB 20 million (inclusive).

(5) Possess core key technologies and intellectual property rights belonging to the enterprise itself, and the enterprise shall hold a total of no fewer than 5 authorized invention patents and computer software copyrights related to integrated circuit packaging and testing.

(6) Possess the basic conditions, such as business premises and software and hardware facilities, that are suitable for the packaging and testing of integrated circuit chips;

(7) During the tax reconciliation and final settlement year, no serious acts of dishonesty, major safety incidents, major quality accidents, or serious environmental violations occurred.

V. The definition of research and development expenses referred to in the enterprise eligibility criteria set forth in this announcement shall be governed by the provisions of the “Notice from the Ministry of Finance, the State Administration of Taxation, and the Ministry of Science and Technology on Improving the Policy for Pre-Tax Additional Deduction of Research and Development Expenses” (Cai Shui [2015] No. 119) and the “Announcement of the State Administration of Taxation on Issues Relating to the Scope of Collection for Pre-Tax Additional Deduction of R&D Expenses” (State Administration of Taxation Announcement No. 40 of 2017), among other relevant regulations.

6. Integrated circuit design, equipment, materials, packaging, and testing enterprises that meet the eligibility criteria shall enjoy tax incentives in accordance with the “Self-Determination, Declaration for Enjoyment, and Retention of Relevant Documentation for Verification” approach stipulated in the “Announcement of the State Administration of Taxation on the Release of the Revised ‘Measures for Handling Preferential Tax Policies for Enterprise Income Tax’” (State Administration of Taxation Announcement No. 23 of 2018). The key documentation to be retained for verification is listed in the attachment. After completing the annual tax reconciliation and final settlement, enterprises enjoying these incentives shall submit the key documentation required for verification to the tax authorities as prescribed. The tax authorities will then forward this documentation to the provincial-level departments of industry and information technology for verification, in accordance with Article 10 of Cai Shui [2016] No. 49.

7. This announcement shall take effect as of January 1, 2020, and shall be interpreted jointly by the Ministry of Industry and Information Technology together with the National Development and Reform Commission, the Ministry of Finance, and the State Administration of Taxation.

Attachment: Main Supporting Documents for Retention and Reference by Enterprises Engaged in Integrated Circuit Design, Equipment, Materials, Packaging, and Testing That Benefit from Preferential Corporate Income Tax Policies.pdf

Ministry of Industry and Information Technology
National Development and Reform Commission
Ministry of Finance
State Administration of Taxation
April 22, 2021