China Plans Tax Breaks For High Tech SMEs

Li Yizhong, head of the Ministry of Industry and Information Technology, has disclosed to local media that China will continue to launch many favorable tax policies to support the development of small and medium sized technology enterprises.

According to Li, China will set up a special foundation for the development of SMEs; reduce by half the income tax payable of small enterprises; lower the land use tax of SMEs; and postpone the tax payment of SMEs who face certain difficulties. Meanwhile, Li said that the local finance departments around China would also strengthen their support for the SMEs.

Li stated that many measures have been taken in recent years to ease the burden of SMEs. For example, the enterprise income tax rate has been reduced from 33% to 25% and a preferential tax rate of 20% is now offered to small enterprises.

On top of that, a 15% tax rate is now provided for high tech enterprises that meet the High and New Technology Enterprises criteria. The HNTE criteria were enhanced recently to focus on providing the beneficial tax rate to only the top tier software and hardware businesses that provide unique services in China. Companies who hope to meet these new, stricter criteria must have a certain amount of their funds used on research and development; they must employ a certain percentage of staff who have doctoral degrees; they should have a required amount of technical staff on their payrolls who graduated with tech-related diplomas from Chinese universities; and the companies must provide local regulatory agencies with schematics and programming codes for key technology products.

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