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	CIRCULAR OF THE STATE ADMINISTRATION OF TAXATION ON THE IMPLEMENTATION OF THE PREFERENTIAL POLICIES REGARDING THE CORPORATE TAX OF SOFTWARE ENTERPRISES AND HIGH-TECH ENTERPRISES

	(No.82 (2003) of the State Administration of Taxation promulgated on May 29, 2003 and implemented as of January 1, 2003)


SUBJECT : CORPORATE TAXATION; PREFERENTIAL POLICY;SOFTWARE ENTERPRISES AND HIGH-TECH ENTERPRISES
ISSUING DEPARTMENT : STATE ADMINISTRATION OF TAXATION
ISSUE DATE : 05/29/2003
IMPLEMENT DATE : 01/01/2003
LENGTH : 479 words
TEXT :

After the promulgation of the Circular on Relevant Policies for Encouraging the Development of the Software and Integrate Circuit Industries (No.25 (2002) of the Ministry of Finance and the State Administration of Taxation) by the Ministry of Finance, the State Administration of Taxation, and the General Administration of Customs (hereinafter referred to the Circular), and of the Circular on Taxation Policies for Further Encouraging the Development of the Software and Integrate Circuit Industries(No.70 (2002) of the Ministry of Finance and the State Administration of Taxation) by the Ministry of Finance and the State Administration of Taxation, the disunity between these two circulars regarding some policies has been reported by a few local authorities, relevant matters are therefore specified as follows after deliberation:

I. The "newly-established software manufacturing enterprise" in Paragraph 2 of Article 1 of the Circular refers to those software manufacturing enterprises newly established after July 1, 2002, the day on which the Circular became effective. Software manufacturing enterprises established before July 1, 2002 shall not enjoy the preferential policy of enterprise income tax reduction or exemption that are enjoyable by the newly-established ones. If an enterprise has been recognized as a key software manufacturing enterprise in the State planning, it shall be subject to provisions stipulated in Paragraph 3 of Article 1 of the Circular.

II. The first profit-making year of the software manufacturing enterprise refers to the first year, after the beginning of its business, in which the enterprise draws incomes for which taxes should be paid. If the enterprise runs at a loss in its beginning years, it may, according to relevant taxation regulations, make up the losses with the profits of subsequent years, and the year when all the losses have been made up and there are taxable incomes shall be the first profit-making year.

III. For those software manufacturing enterprises enjoying the policy provided in Paragraph 2 of Article 1 of the Circular, which stipulates that the enterprise income tax may be exempted in the first and second years, and be reduced to half from the third year to the fifth year, the years in which taxes should be accordingly exempted or reduced shall be counted continuously from the first profit-making year, and shall not be postponed for the enterprise runs at a loss during that period.

IV. For an enterprise which has been recognized as the newly-established software manufacturing enterprise and which meanwhile is a high-tech enterprise newly established in the High-tech Industry Development Zone approved by the State Council, it may enjoy the preferential tax reduction and exemption for newly-established software manufacturing enterprises. The enterprise income tax shall be reduced to half on the basis of a 15% rate during the period of tax reduction, and shall be accounted and collected at a rate of 15% after the preferential period.

V. This circular shall be implemented as of January 1, 2003.