On July 11, 2008, China’s Ministry of Finance (MOF), Ministry of Science and Technology (MOST) and State Administration of Taxation (SAT) issued the Work Guidelines on the Recognition of High- and New-Tech Enterprises (HNTE). The guidelines supplement the Administrative Measures on the Recognition of HNTEs issued on April 24, 2008, and set forth qualification requirements for auditing agencies that will provide audit reports during an enterprise’s HNTE assessment.
The guidelines define several key indicators used in the HNTE assessment, including core self-owned intellectual property rights (IPR). These are defined as inventions, utility models and industrial designs that do not simply change a designs’ pattern or shape, software copyrights, integrated circuit design layouts and new plant varieties. The guidelines provide specific weighted calculation methods to evaluate self-owned IPR, the ability to organize and manage R&D, the ability to convert scientific and technological achievements, and the sustainability of sales and total assets. An enterprise must score 70 out of 100 in this calculation before it may obtain HNTE status.
Under China’s corporate income tax law, HNTEs are entitled to preferential income tax rates ranging from 10 to 15%.