Business in China

On April 24, 2008, the Ministry of Science and Technology (MST), the Ministry of Finance (MOF) and the State Administration of Taxation (SAT) promulgated the Measures for the Recognition of High and New Technology Enterprise (hereinafter “New Rules”), which have become effective as of January 1, 2008.


Old Rules
Before the New Rules are promulgated, recognition of high and new technology enterprise (hereinafter “HNTE”) is governed by the following two rules:

1. The Measures for and Conditions of the Recognition of High and New Technology Enterprise Located outside the State High and New Technology Development Zones (1996); and
2. The Measures for and Conditions of the Recognition of High and New Technology Enterprise Located within the State High and New Technology Development Zones (2000).

These two rules (hereinafter jointly “Old Rules”) were invalidated on January 1, 2008.

Major Changes

Comparing with the Old Rules, the following major changes have been introduced in the New Rules:

1. Enterprise engaging in hi-tech service business has the opportunities to be recognized as the HNTE;

2. Applicant for being recognized as HNTE must have the independent IPR to the core technology of his major products or services, which IPR may be obtained by such ways as self-research, assignment, M&A or exclusive licensing; the incomes generated from his high and new technological products or services exceed 60% of the total annual incomes. In addition, the total amount of capital spent by the applicant into R&D in the latest 3 fiscal years is not less than certain percentage of his total turnovers in the same period (6%, 4% or 3%, depending on the amount of turnover in the latest year);

3. In addition to MST, MOF and SAT are authorized by the New Rules as authorities in charge of recognition of HNTE; and

4. Four circumstances are listed by the New Rules, under which HNTE Qualification of an enterprise may be cancelled. Re-application by that enterprise will not be accepted by the recognition authorities within 5 years thereafter.

Tax Incentive

In accordance with the provisions of the Enterprise Income Tax Law (effective on Jan. 1, 2008), enterprise being recognized as HNTE may enjoy a preferential income tax rate (15%).

For a better understanding of the recent development in this regard, Beyondfield Team has made a comparison study on this topic, including:

1. Key Issues Comparison: New Rules vs. Old Rules

2. Conditions of Recognition of HNTE

3. Procedures for Recognition of HNTE


Source : BIS Shanghai