Recently, the Ministry of Finance ("MOF") and the State Taxation Administration ("STA") have jointly issued the Announcement on the Enterprise Income Tax Policy for Integrated Circuit Design and Software Enterprises (the "Announcement").
The Announcement reads that an integrated circuit design enterprise or a software enterprise that is legally established and satisfies certain conditions, will be exempted from enterprise income tax (EIT) in the first two years and only need to pay EIT at half of the 25% statutory EIT rate from the third to fifth years, during the period of tax preference that starts from the first profitable year before December 31, 2018, and may enjoy tax incentives until the end of such period. Meanwhile, the Announcement expressly states that "satisfying certain conditions" as stated in the first article hereof refers to the fulfillment of requirements laid out in the Circular of the Ministry of Finance and the State Taxation Administration on the Enterprise Income Tax Policy for Further Encouraging the Development of the Software Industry and the Integrated Circuit Design Industry and in the Circular of the Ministry of Finance, the State Taxation Administration, the National Development and Reform Commission and the Ministry of Industry and Information Technology on Matters Concerning the Preferential Enterprise Income Tax Policy for Software and Integrated Circuit Design Enterprises.