The Shanghai Municipal Tax Service, State Taxation Administration and other three departments jointly released on May 19, 2023 the Announcement on Issues Concerning Substantive Production or R&D Activities of Key Industrial Enterprises in the Lin-gang Special Area of the China (Shanghai) Pilot Free Trade Zone (Exposure Draft) for public comment.
Under the MOF and STA No.38 (2020) document, those qualified incorporated enterprises that are engaged in business revolving around products (technologies) in key areas such as integrated circuits, artificial intelligence, biomedicine and civil aviation in the Lin-gang Special Area and conduct substantive production or R&D activities would be eligible for a reduced corporate income tax rate of 15 percent within five years from the date of their establishment. According to the Announcement, an enterprise that would be deemed as conducting substantive production or R&D activities in the special area must have fixed production and operation premises and fixed staff members, meet the required software and hardware conditions in the area, and carry out related business on this basis.