On 2 November 2017, China’s State Administration of Taxation has issued Circular 79 of 2017 to expand tax incentives for advanced technology service enterprises. A 15% special corporate tax rate has been offered in 21 cities since 2014 on a pilot basis to increase investment by tech firms.

This circular includes two main tax incentives for advanced technology service enterprises will be rolled out nationwide in China such as, reduction in the CIT rate from 25% to 15%, increasing in the employee education expense deduction limitation of total salaries and wages from 2.5% to 8%.

In order to qualify, an enterprise must seek approval with following conditions from their local competent authorities:

  • Enterprise must be incorporated in China (excluding Hong Kong, Macao and Taiwan regions);
  • To adopt advanced technology or have strong R & D capability to engage in one or more advanced technology-based service businesses;
  • At least 50% of a company’s workforce must be educated to degree level;
  • At least 50% income derived from a technologically advanced services business;
  • Income from engaging in offshore service outsourcing business shall not be less than 35% of the total income during the year.