China's Ministry of Finance, State Administration of Taxation, Ministry of Commerce, Ministry of Science and Technology and National Development and Reform Commission jointly issued Caishui [2018] No. 44 (Circular 44)¹ to expand the scope of eligible services for a Technology Advanced Service Company (TASC) nationwide. Circular 44 is retroactively effective as of 1 January 2018.

A TASC is eligible for a reduced 15% corporate income tax rate.

The initial eligible services for TASC covered outsourcing services, i.e., information technology outsourcing, business process outsourcing and knowledge process outsourcing.

The list of services was further expanded in 15 designated pilot areas for the period from 1 January 2016 to 31 December 2017 to include the following high-end technologies and high value-added services:²

• Computer and information services, e.g., information system integration and data service
• Research & development (R&D) and technology services, e.g., research and experimental development, industrial design, cross-border intellectual property licensing and transfer
• Culture technology service, e.g., digital production of cultural product and related service, translation, dubbing and production of cultural product
• Traditional Chinese medical treatment service

Under Circular 44, the eligible services for a TASC are expanded nationwide.

Circular 44 significantly broadens the scope of eligible services for the TASC incentives, which indicates China's support to the development of these industries. Multinational companies engaging in information technology, R&D and media & entertainment industries may review the operations in China to assess eligibility for the TASC incentive.

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ENDNOTES

¹ Circular 44 was issued on 19 May 2018.

² See EY Global Tax Alerts, China expands scope of technologically advanced service company incentives, dated 8 March 2016.

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CONTACTS

For additional information with respect to this Alert, please contact the following:

Ernst & Young Tax Services Limited, Hong Kong

• Jane Hui
  jane.hui@hk.ey.com
• Becky Lai
  becky.lai@hk.ey.com

Ernst & Young Ernst & Young (China) Advisory Limited, Shanghai

• Walter Tong
  walter.tong@cn.ey.com
• Vickie Tan
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Ernst & Young Ernst & Young (China) Advisory Limited, Beijing

• Henry Chan
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• Martin Ngai
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• Andrew Choy
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Ernst & Young Ernst & Young (China) Advisory Limited, Shenzhen

• Clement Yuen
  clement.yuen@cn.ey.com

Ernst & Young LLP, China Tax Desk, New York

• Min Fei
  min.fei@ey.com
• Andrea Yue
  andrea.yue1@ey.com
• Vickie Lin
  vickie.lin@ey.com
• Claire Geng
  claire.geng1@ey.com

Ernst & Young LLP, China Tax Desk, San Jose

• Diana Wu
  diana.wu@ey.com

Ernst & Young LLP, Asia Pacific Business Group, New York

• Chris Finnerty
  chris.finnerty1@ey.com
• Kaz Parsch
  kazuyo.parsch@ey.com
• Bee-Khun Yap
  bee-khun.yap@ey.com

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