Under the new 2008 Enterprise Income Tax regime, qualified High/New Technology Enterprises (HNTEs) are eligible to enjoy preferential tax rate. Recently, the China’s Ministry of Science and Technology, the Ministry of Finance and the State Administration of Taxation jointly released the “Administrative Measures for Assessment of High/New Technology Enterprises” and the “Catalogue of High/New Technology Domains Specifically Supported by the State” (Catalogue) by a way of joint circular GuoKeFaHuo (2008) No.172, with retrospective effect from 1 January 2008.

1. Registered in Mainland China for at least one year

2. Requirements for HNTEs qualification

1. Registered in Mainland China for at least one year
2. Possess Intellectual Property (IP) rights
   • The enterprise has obtained the IP rights of the core technology in the last 3 years through own R&D activities, transfer/ purchase, donation, merger, etc. ; or
   • The enterprise should secure an exclusive right to use the IP rights for a period of at least 5 years, and the IP rights should be associated with the main products/ service of the enterprise
3. Products/services within the scope of Catalogue

Below are the 8 domains of the products/ services which are specially supported by the government:

• Electronic information technology
• Biological and medical technology
• Aviation and space technology
• New materials technology
• High-tech services
• New energy and energy conservation technology
• Resources and environmental technology
• Transformation of traditional sectors through high-new technologies

4. Headcount of scientific technology staff

• Headcount of scientific technology staff with college degree and above should be more than or equal to 30% of total headcount; and
• Headcount of R&D staff must be more than or equal to 10% of total headcount.

5. R&D expenditure

R&D expenditure should reach a prescribed minimum percentage of total revenue for the past three years:

Total revenue in preceding year	% of R&D expenditure over total revenue
Below RMB 50 million	>= 6%
Between RMB 50 million and 200 million	>= 4%
Above RMB 200 million	>= 3%

Note that R&D expenditures incurred in China should not be less than 60% of the total R&D expenditures.

6. Revenue from high/new technology products/service

Revenue from the high/ new technology products/services should be more than 60% of total revenue of the enterprise.

7. Working Guidelines for Assessment of HNTEs (Guidelines)

The enterprise should meet the requirements of the Guidelines in respect of the rating in R&D management; capability for converting R&D outcome; number of IP rights; and growth of sales and total assets. The Guidelines will be issued later.

3. Administration of application

1. E nterprise should first log onto the Guidelines ’ website to complete self-assessment, which is in line with criteri on mentioned above.
2. If enterprise s pass the self-assessment, they should apply for HNTE status with all required documents to assessment institution.
3. Upon the approval of assessment institution, enterprises will be awarded with HNTEs ’ certificates, which will valid for a period of 3 years commencing from the date of issue.
4. Within 3 months before expiry of the se certificates , enterprise s should apply for re-assessment to renew the qualification for another 3 years. T he enterprise s that failed to apply or qualify for re-assessment will not be regarded as HNTEs and they will not be eligible for tax incentives.