China's Ministry of Finance and State Administration of Taxation recently announced a series of preferential income tax policies for software and IC enterprises. An industry source said that the new policies were a more highly ramified update to the Policies for the Further Encouragement of Software and IC Industry Development, released in February 2011 by the State Council, and will directly benefit enterprises in the targeted areas.

IC manufacturers who produce 0.8-micron or smaller circuitry will have all income taxes waived for two years starting from the first year they become profitable, and will have half of the legally designated 25% income tax waived from the third to fourth years.

Manufacturers of integrated circuits smaller than 0.25 microns and enterprises that have invested more than RMB 8 bln in IC manufacturing will be subject to a corporate income tax rate of 15%; companies that have been in business for 15 or more years will have all corporate income taxes waived for a five-year period starting from the first year of profitability, and will be taxed at half of the legally designated 25% corporate income tax rate for the next five years.

Qualifying new domestic IC design companies will have corporate income taxes waived for a two-year period from their first year of profitability, following which they will be taxed at half the legally designated 25% corporate income tax rate for the next two years.

To qualify, corporations will be required to have turned an annual profit during some year between January 1, 2011 and December 31, 2017.
 

Source:marbridgeconsulting