Effective 5 August 2020, China allows the reduction of import duties and VAT or consumption tax on imports of 20 listed commodities that were previously prohibited in the Notice of State Council  No. 64.
The 20 commodities concerned include:
refrigerators and freezers;
stored program control telephone switching systems;
microcomputers and peripherals;
wireless paging systems;
typewriters and text processors;
lamps/lighting instruments; and
food materials (condiments, meat, eggs and vegetables, seafood, fruit, soft drinks, alcohol drinks and dairy products).
The repeal of the prohibition was announced in Circular  No. 36, jointly issued by the Ministry of Finance, General Customs and the State Taxation Administration.
China has renewed its policy of promoting the development of high-quality integrated circuits (ICs) and software, including tax and other incentives, for the industry.
The main tax incentives announced are as follows:
Exemption from enterprise income tax
Post-exemption reduced tax rate
Minimum period of manufacturing operations
enterprises or projects engaged in manufacturing ICs with a line width of not more than 0.8 microns
first 10 years
none (normal rate of 25%)
enterprises or projects encouraged by the state that are engaged in manufacturing ICs with a line width of not more than 65 nanometres
first 5 years
12.5% for 5 years
enterprises or projects encouraged by the state that are engaged in manufacturing ICs with a line width of not more than 130 nanometres*
first 2 years
12.5% for 3 years
enterprises engaged in the design, assemble, materials, packing and testing of ICs, and software enterprises that are encouraged by the state
first 2 years starting from first profit-making year
12.5% for 3 years
key encouraged enterprises engaged in the design of ICs and software enterprises
first 5 years starting from first profit-making year
* Losses may be carried forward for 10 years (instead of the normal 5 years).
The tax incentives commence from the first profit-making year of the enterprise or, in the case of projects, the first year in which revenue is derived from manufacturing. A list of enterprises and projects that are eligible for the incentives will be compiled by the relevant ministries.
In respect of indirect taxes:
the current preferential policy on value added tax (VAT) for ICs and software enterprises in relation to the refund of VAT exceeding 3% of the total VAT burden (thus after offset against input tax) continues to apply; and
qualified enterprises are exempt from import duties on certain items and key IC projects may be allowed to pay VAT on import of new equipment in instalments.
It is noted that the incentives are available to all ICs and software enterprises established in China that have fulfilled the requirements stated therein, regardless of the source of their investment capital (thus regardless of whether they are state-owned or private, or domestic or foreign invested).
The State Council issued Notice of State Council  No. 8, which came into effect on 4 August 2020 for the above incentives. In addition, Notice of State Council  No. 18 and Notice of State Council  No. 4 remain effective. However, in case of divergence, the provisions of Notice of State Council  No. 8 will prevail.