Four authorities including the Ministry of Finance ("MOF") have jointly issued the Circular on Enterprise Income Tax Policies for Further Encouraging the Development of the Integrated Circuit Industry (the "Circular"), aiming to promote technological innovation and industrial structural upgrading, and the development of the information technology industry.
The Circular clarifies that where qualified integrated circuit ("IC") packaging and testing enterprises, key IC special material manufacturing enterprises and IC special equipment manufacturing enterprises are profitable prior to 2017 (inclusive), they shall be exempted from enterprise income tax ("EIT") for the first and second year as of the profit-making year, and shall be subject to a half-reduced EIT at the statutory tax rate of 25% from the third to fifth year until the expiry of the term of preferential policies; where the said enterprises fail to make a profit prior to 2017, they shall enjoy the preferential policies from 2017 until the expiry of the term of the preferential policies. The Circular specifies the requirements to be met by the aforesaid enterprises. Enterprises which meet the requirements provided under the Circular shall go through the tax reduction and exemption formalities with the competent tax authorities by presenting the certificates issued by the relevant authorities at the provincial level within four months after the end of each year. The Circular took effect as of January 1, 2014.