Circular on the Tax Policies for Venture Capital Enterprises and Individual Angel Investors

Circular on the Tax Policies for Venture Capital Enterprises and Individual Angel Investors

Circular on the Tax Policies for Venture Capital Enterprises and Individual Angel Investors

Cai Shui [2018] No.55

May 14, 2018

Departments (bureaus) of finance, local offices of the State Administration of Taxation and local tax bureaus of all provinces, autonomous regions, municipalities directly under the Central Government and cities separately listed in the State plan, and the Finance Bureau of the Xinjiang Production and Construction Corps,

For the purpose of supporting the development of the venture capital industry, matters on the tax policies for venture capital enterprises and individual angel investors are hereby notified as follows.

I. Tax Policies
1. Where a venture capital enterprise of corporate nature has directly invested in the form of equity investment, in a technology-oriented enterprise at the seed or early stage (hereinafter referred to as the "technology-oriented start-up") for two years (equivalently 24 months, the same below), 70 percent of the amount of its investment may be deducted from the taxable income obtained by this venture capital enterprise of corporate nature in the year when the equity has been held for two years; where the said taxable income of the current year is insufficient to offset the deductible amount, the remaining portion may be carried forward to forthcoming tax years.
2. Where a venture capital enterprise, with the nature of a limited liability partnership (hereinafter referred to as "venture capital partnership"), has directly invested in the form of equity investment in a technology-oriented start-up for two years, partners of this venture capital partnership shall deal with their own investment as follows,
(1). The partner that is a legal person may deduct 70 percent of the amount of its investment in this venture capital partnership from the income it obtains from the venture capital partnership; where the said income of the current period is insufficient to offset the deductible amount, the remaining portion may be carried forward to forthcoming tax years.
(2). An individual partnership may deduct 70 percent of the amount of its investment in this venture capital partnership from the business income he or she obtains from such venture capital partnership; where the said income of the current period is insufficient to offset the deductible amount, the remaining portion may be carried forward to forthcoming tax years.
3.
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