CERTIFYING HIGH AND NEW TECH ENTERPRISES UNDER CHINA’S NEW INCOME TAX LAW

China has enacted its new PRC Enterprise Income Tax Law (EIT Law). The new EIT Law, effective January 1, 2008, adopts a standard income tax rate of 25 percent. The new rate has been reduced from the prior 33 percent. However, the effective income tax rate for Foreign Investment Enterprises (FIEs) may actually increase as a result of the EIT Law. When taking into account various tax incentives previously available to FIEs, the effective income tax rate applicable to FIEs was only 15 percent, according to official statistics. The new EIT law has repealed many of these tax incentives, which brings up the actual tax burden of many FIEs despite the lower nominal 25 percent rate.

Nonetheless, there are still some tax incentives available under the new EIT Law, generally limited to certain encouraged industries and projects, in particular those related to high tech. The most significant tax incentives applicable to FIEs are those associated with the certified status of High and New Technology Enterprise (HNTE).

For our readers, we have prepared an overview of the tax benefits that FIEs may receive by qualifying as HNTEs, as well as the steps companies need to take to obtain HNTE status.

Please read it here.

DLA Piper's International Tax group provides sophisticated and creative tax and business planning advice, delivering prompt, innovative, and effective service to our clients wherever they do business.

For more information, please contact:

In China:

Daniel Chan
Head, Asia Tax Practice

In the US:

Peng Tao

Published by DLA Piper US LLP
Copyright © 2008 DLA Piper US LLP
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