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29 May 2019

China issues one-year extension of preferential corporate tax treatment to integrated circuit and software industry

China’s State Taxation Administration (STA) released STA PN [2019] No. 68 (PN 68) on 17 May 2019 for a one-year extension of the preferential corporate income tax (CIT) provision to the integrated circuit (IC) and software industry.

Before PN 68, qualified IC design enterprises, and software enterprises were entitled to a two-year CIT exemption followed by a three-year 50% CIT reduction of the statutory 25% CIT rate (two plus three tax holiday) from the first profit generating year beginning prior to 31 December 2017.

Under PN 68, the two plus three tax holiday provision applies to the calendar year 2018 if it is the first profit generating year for the qualified IC design enterprises and software enterprises. However, since the tax return due date for the 20181 is 31 May 2019, if taxpayers have already submitted the 2018 tax returns, these taxpayers should file amended returns to claim refunds. Without amending returns, the taxpayers that are otherwise eligible for the preferential tax treatment will lose their ability to claim incentives for the 2019 through 2022 calendar years. If returns have not yet been filed, taxpayers should reflect the incentives in the returns, since filing amended returns is time consuming.

Similar preferential CIT treatment is also provided to the IC manufacturing enterprises.

Endnote

1. The calendar year is the taxable year for all Chinese companies.

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 (China) Advisory Limited, Shanghai
  • Walter Tong | walter.tong@cn.ey.com
  • Vickie Tan | vickie.tan@cn.ey.com
Ernst & Young (China) Advisory Limited, Beijing
  • Henry Chan | henry.chan@cn.ey.com
  • Martin Ngai | martin.ngai@cn.ey.com
  • Andrew Choy | andrew.choy@cn.ey.com
Ernst & Young (China) Advisory Limited, Shenzhen
  • Clement Yuen | clement.yuen@cn.ey.com
Ernst & Young LLP (United States), China Tax Desk, New York
  • Min Fei | min.fei@ey.com
  • Andrea Yue | andrea.yue1@ey.com
  • Vickie Lin | vickie.lin@ey.com
  • Ryan Lu | ryan.lu@ey.com
  • Sherry Cui, Transaction Tax | sherry.cui1@ey.com
Ernst & Young LLP (United States), China Tax Desk, Chicago
  • Lucy Wang | lucy.wang1@ey.com
Ernst & Young LLP (United States), China Tax Desk, San Jose
  • Diana Wu | diana.wu@ey.com
Ernst & Young LLP (United Kingdom), China Tax Desk, London
  • Cyril Lau | cyril.lau@uk.ey.com
  • Christina Li | meng.li@uk.ey.com
Ernst & Young LLP (United States), 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 

ATTACHMENT

Document ID: 2019-5684

 
 

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