To clarify the rules concerning software enterprises that are eligible for certain corporate income tax incentives, China’s State Administration of Taxation has issued guidance on the issues arising in qualifying for these incentives.
According to Announcement No. 43 of 25th July 2013 software enterprises incorporated before 31st December 2010 but that have not been “assessed” may benefit from the corporate income tax incentive policies pursuant to Cai Shui [2008] No. 1, until the expiration of the incentive period.
Cai Shui [2008] No 1 provided among other incentives for a two year exemption and three year 50% reduction in income tax payable. Announcement 43 clarifies that the tax incentive commences from the first profit-making year of the enterprise. However once the tax holiday period has begun it cannot then be suspended if the enterprise makes losses in any year.
