On May 31, 2011, the Ministry of Finance and the State Administration of Taxation jointly released the Circular on Issues Concerning Tax Rates Applicable to the Overseas Income of High/New-tech Enterprises and Tax Credits (“Circular”). The Circular ensures the tax-preferred status of the high/new-tech enterprises (HNTE) with regards to their overseas income, and gives an affirmative answer to the question left by the Enterprise Income Tax Law regarding whether the overseas income tax of a HNTE is subject to the preferential income tax rate.

Below are some highlights of the Circular:

  • In the event that an enterprise includes total R&D cost, total revenue, total sales income, or sales income for high/new-tech products or services into its application for the HNTE status and the authority takes the above indices into consideration, the accredited HNTE will enjoy a 15% preferential rate, instead of the normal income tax rate at 25%, for income originating from both home and abroad. Consequently, the total payable amount of the tax for an HNTE, whether a domestic or foreign-invested company, will be significantly reduced.
  • The HNTE refers to enterprises that are accredited by applicable authorities, such as the local tax bureau, finance bureau and science and technology committee, pursuant to the to the Administrative Measures for Recognition of High/New-tech Enterprises and the Guidance on Recognition and Management of High/Newtech Enterprises. According to these two documents, an enterprise should own core intellectual property, provide products or services that fall within the scope of National Key Sectors of High and New Technology, and retain the proportion of the highly-educated employees and R&D funding above the applicable levels.

- Circular on Issues Concerning Tax Rate Applicable to Overseas Income of High-tech Enterprises and Tax Credit

- 关于高新技术企业境外所得适用税率及税收抵免的通知  

- Issuing Authority: Ministry of Finance and the State Administration of Taxation  

- Date of Issuance: 05/31/2011 / Effective Date: 01/01/2010 (Retroactively Effective)