China's Hi-Tech Firms To Get Preferential Tax Treatment

by Mary Swire, Tax-news.com, Hong Kong

23 May 2001

In an attempt to encourage the development of China's high-tech industry, the government has announced plans to implement preferential taxation policies under which companies operating in the 50-plus high-tech parks throughout the country will benefit.

According to reports from the People's Daily online news service, major taxation policies involve the reduction of corporate income tax, bringing it down to a rate of 15 per cent. And if the export operations of the companies equate to at least 40 per cent of the total production the tax could be lowered to 10 per cent.

A company may be exempt from corporate income tax for the first three years of production if it deals with at least one new form of technology. From the fourth year to the sixth year, the original 10/15 per cent rates of income tax will be halved. In addition State supported funds will be established to support the growth of new technologies.

China's high-tech parks, known officially as the 'New and High Technology Industries Development Zones' were launched across the country ten years ago and have cultivated some of China's most successful companies in terms of market-oriented and innovative enterprises. In 2000, the zones' combined income amounted to 920.9 billion yuan (US$111 billion) generating revenue for the government of around 46 billion yuan.

By 2005, the zones are expected to net an income of 1.7 trillion yuan with an export value of around US$30 billion. Xu Guanhua, Minister of Science and Technology, told the People's Daily: 'Most of the national zones feature fast economic growth, high economic returns, strong innovative capabilities and great development potential.'

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