On 29 January 2016, the Ministry of Science and Technology (MOST), Ministry of Finance (MOF) and State Administration of Taxation (SAT) jointly issued a notice revising the administrative measures with regard to the classification of high and new technology enterprises (Guo Ke Fa Huo [2016] No. 32). The new measures retroactively apply from 1 January 2016. After recognition, the status certificate will be valid for three years after the issue date, affording the enterprise with tax incentives such as a reduced 15 percent corporate income tax and staff training reimbursements. The updated requirements and qualifications for a high-tech enterprise, as well as the application material required, are summarized below.
Eligibility and Requirements
Enterprises seeking to obtain high-tech enterprise status must meet the following criteria:
- Be a fully or partly foreign owned company registered within the People’s Republic of China, not including the regions of Hong Kong, Macau or Taiwan;
- Be operating within the specified fields stated in the “high-tech fields supported by the state;”
- Implement continued research and development and technological achievements;
- Have acquired the intellectual property rights that technically support their main products (services) by means of independent R&D or purchasing and transferring;
- Have been established for a year or more;
- The technical personnel of enterprises engaged in research and development and related technological innovation activities account for no less than 10 percent of the total number of employees in that year;
- In the last three financial years, R&D expenditure accounts for sales income adhere to one of the following:
- In the last year, total income is not less than five percent if latest annual sales income is less than RMB 50 million;
- Not below four percent if the latest annual sales income is between RMB 50 million and RMB 200 million; and not below three percent if the latest annual sales income is upwards of RMB 200 million.
- R&D expenditure within China is not less than 60 percent;
- The ratio of income from high-tech related operations against total income is not lower than 60 percent.
Application Material
The following is a list of relevant material to be submitted along with a high-tech enterprise status application:
- Relevant registration documents proving legal business establishment;
- IP-related materials, scientific research project certification, scientific and technological achievements, the organization and management of research and development and other related materials;
- Product/services technical specifications, production approval, certification and accreditation and related qualification certificates, product quality inspection report and other related materials;
- For enterprises with qualifications issued by agents, R&D expenses from the last three fiscal years, revenue audit reports or attestation report of new technology products or services from the last fiscal year, accompanied by explanatory materials research and development activities pertaining to R&D activities are also required;
- For enterprises with appraisal of qualified agents, financial account reports from the last three fiscal years, including financial statements, accounting statements and financial situation, are required;
- Annual CIT return certificate.
Supervision and Terms of Violation
The Ministry of Science and Technology, Ministry of Finance and State Administration of Taxation are held responsible for the supervision following accreditation of high-tech enterprise status. Authorities who discover enterprises which do not meet specified conditions will invite certified organizations to conduct a review. If the enterprise is found to not comply with the conditions, high-tech enterprise status will be withdrawn, and tax authorities will be notified.
