High and New Tech enterprise in China is recognized pursuant to relevant provisions of the PRC Enterprise Income Tax Law (the Enterprise Income Tax Law) and the Implementing Regulations for the PRC Enterprise Income Tax Law (the Implementing Regulations) in order to support and encourage the development of hi-tech enterprises. Once an enterprise has obtained qualifications as a hi-tech enterprise, it may carry out the tax reduction or tax exemption procedures with the competent tax authority.
The term “High and New Tech Enterprise” means a tax-resident enterprise registered in China (excluding Hong Kong, Macao and Taiwan) for at least one year that falls within the Hi-tech Sectors Supported by the State on a Priority Basis, and conducts research and development and applies technological achievements practically on an ongoing basis, with such achievements forming the core of the enterprise’s self-controlled intellectual property rights, and that uses the same as the basis for carrying out its business activities.
Conditions on High and New Tech Enterprises
For recognition as a hi-tech enterprise an enterprise must satisfy all of the following conditions:
(1) being an enterprise registered in China (excluding Hong Kong, Macao and Taiwan) and owning the self-controlled intellectual property rights in the core technology of its principal products (or services) through its own development, transfer, acceptance of the donation, or mergers or acquisitions during the last three years or through an exclusive licence therefor of at least five years;
(2) its products (or services) falling within the scope specified in the Hi-tech Sectors Supported by the State on a Priority Basis;
(3) science and technology personnel with at least an undergraduate degree accounting for at least 30% of its total workforce during the years in question, and the research and development personnel therein accounting for at least 10% of its total workforce during the years in question.
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Procedures for the recognition of High and New Tech Enterprises
(1) self-assessment and application by the enterprise;
(2) submission of the following application materials;
(3) compliance review;
(4) recognition, announcement and record filing;
Materials to be submitted
(i) Application letter for recognition as a hi-tech enterprise;
(ii) Duplicate of its business licence and (a photocopy of) its tax registration certificate;
(iii) Intellectual property certificate, production approval document, new product or new technology evidentiary (novelty retrieval) materials, product quality inspection report, proof of approval of science and technology plan at the provincial level or above and other relevant supporting documentation;
(iv) Number of persons in its workforce, the structure of their educational backgrounds and a statement on the percentage of its workforce that is accounted for by research and development personnel;
(v) A chart of its research and development outlays during the most recent three financial years authenticated by a qualified intermediary organization, accompanied by materials explaining its research and development activities and;
(vi) Financial statements for the most recent three financial years authenticated by a qualified intermediary organization, and a chart of its technology related revenues.
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