June 2023 / China

June 6 2023

Qianhai Clarifies the Criteria of “Substantive Operation” for the Access to the Preferential CIT Policies

The Shenzhen Tax Service and the Authority of Shenzhen-Hong Kong Modern Service Industry Cooperation in Qianhai jointly released on June 5, 2023 the Announcement on Clarifying the Issues concerning the Application of Preferential Corporate Income Tax Policies in the Shenzhen-Hong Kong Modern Service Industry Cooperation in Qianhai ("Qianhai Cooperation Zone"), which took effect on January 1, 2023.

Under the MOF and STA No.30 (2021) document, qualified companies established in the Qianhai Cooperation Zone are eligible for the reduced 15 percent corporate income tax ("CIT") rate. The Announcement further clarified that those resident enterprises that are registered in the Qianhai Cooperation Zone would be considered meeting the criteria of "substantive operation" if they are engaged in the industries that meet the requirements and have their production and operation, personnel, accounting, and property in the Zone, while those resident enterprises that are just registered in the Zone and do not have their production and operation, personnel, accounting or property in the Zone would not be considered meeting the criteria and would not be eligible for the preferential CIT policies.

June 20 2023

Nansha Unveils Criteria for the Recognition of Substantive Operation Required for the Entitlement to the Reduced CIT Rate of 15 Percent

The Tax Bureau of Nansha District, Guangzhou and other three authorities have jointly released the Announcement on Issues concerning Substantive Operation of Enterprises in Encouraged Industries in Nansha of Guangzhou, with effective from January 1, 2022 to December 31, 2026.

It is clarified in the MOF and STA No.40 (2022) document that enterprises should meet two conditions to be eligible for the reduced corporate income tax ("CIT") rate of 15 percent in Nansha, including conducting "substantive operation". Compared with the Exposure Draft, the Announcement has improved the statement of the requirements for "substantive operation" relating to production and operation, personnel, accounts, and properties. It is stated that those resident enterprises that are just registered in Nansha district and do not have their production and operation, personnel, accounting or property in the district would not be considered meeting the criteria for substantive operation, and would not be eligible for the preferential CIT policies.

June 3 2023

Shanghai Consults Public on Substantial Production Criteria for Preferential Corporate Income Tax in Lin-gang Special Area

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.

June 22 2023

Qualified Taxpayers Can Enjoy Additional Deduction of R&D Expenses in July

The State Taxation Administration ("STA") and the Ministry of Finance ("MOF") released on June 21, 2023 the Announcement on Issues concerning Improving the Policy of Allowing Additional Deduction of R&D Expenses in Prepayment Declaration (No.11 document in 2023).

Starting from 2023, qualified companies are eligible for additional deduction of its R&D expenses incurred in the first half of the year in July, meaning that they can enjoy the policy three months earlier than they enjoy the same in October, according to the Announcement.