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With the unswerving development of society and economy as well as further development of the reform of enterprises, there arises a new problem that the standards for determining the newly-established enterprises that may enjoy the preferential policies for the enterprise income tax are not clear enough. Upon deliberation, we hereby clarify the standards for determining the newly-established enterprises that may enjoy the deduction or exemption of the enterprise income tax on a periodic base as follows: I. Standards for determining the newly-established enterprises that may enjoy the deduction or exemption of the enterprise income tax on a periodical base are the following: (1) Where an enterprise has handled the formalities for registration of establishment with its registered capital in the administrative department for industry and commerce according to relevant laws, regulations and provisions of the state; (2) Where such non-monetary assets as fixed assets and intangible assets as actually contributed by equity contributors (shareholders or any other equity investors) of a newly-established enterprise accumulatively amount to no more than 25% of its registered capital. In particular, the registered capital of a newly-established enterprise shall be the paid-in capital or equity that has been registered by the administrative department for industry and commerce. The non-monetary assets include such fixed assets as buildings, machines and equipments as well as such intangible assets as patent rights, trademark rights and non-patented technologies. Where any equity contributor of a newly-established enterprise makes contributions by means of non-monetary assets which have been assessed by a qualified accounting (auditing or taxation) firm, the value upon assessment shall be the amount of capital contributions. In the case of no assessment, the same kind of assets or the market price of identical assets in the current day or in the latest month as provided by taxpayers shall be subject to the verification of the competent tax authority. II. During the period when a newly-established enterprise enjoys the preferential policies of deduction or exemption of the enterprise income tax on a periodical base, where the non-monetary assets as accumulatively purchased by the equity investors as well as the associated parties thereof make up more than 25% of its registered capital, the enterprise may no longer enjoy any preferential policies of deduction and exemption of the enterprise income tax as a relevant enterprise. III. The present Circular shall come into force as of the day of issuance. The specific taxation scope implemented by the state taxation bureaus and local taxation bureaus shall be based on the standards for determining the newly-established enterprises as prescribed in the present Circular. The taxation scope as applied before the present Circular comes into force to those enterprises subject to the tax administration of the state taxation bureaus and local taxation bureaus may not be adjusted. For any newly-established enterprise that has obtained the approval for enjoying the preferential policies for the enterprise income tax, the preferential treatment may continue to the expiration according to the relevant provisions. IV. The term "Definition of newly-established enterprises" and the conditions for determination as prescribed in the VI of the Circular of the State Administration of Taxation on Several Specific Issues concerning the Enterprise Income Tax (No. 229 [1994] of the State Administration of Taxation) shall be simultaneously abolished. |
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