The Ministry of Finance, the State Administration of Taxation and three other authorities have jointly released the Circular on Issues Improving Enterprise Income Tax Policies for Technologically Advanced Service Enterprises (the "Circular").

The Circular provides that from January 1, 2014 and December 31, 2018, 21 service outsourcing demonstration cities in China including Beijing, Tianjin, Shanghai, Chongqing, Dalian and Shenzhen shall be subject to preferential enterprise income tax ("EIT") policies as follows: accredited technologically advanced service enterprises shall be subject to EIT at the rate of 15%; where accredited technologically advanced service enterprises incur staff education expenses, the part of such expenses that does not exceed 8% of the total amount of wages and salaries is allowed to be deducted when the taxable income is calculated; and the exceeding part of the said expenses is allowed to be carried forward and deducted in the following tax years. In addition, the Circular specifies that the revenue earned from offshore service outsourcing business of the enterprises entitled to the aforesaid preferential policies shall be no less than 35% of their total revenue in the same year.