The Ministry of Finance has issued a notice on the issue of corporate income tax policies for integrated circuit production enterprises. After January 1, 2018, integrated circuit production enterprises or projects that invest in newly established integrated circuits with a line width less than 130 nanometers and an operating period of more than 10 years will be exempt from corporate income tax for the first two years, and will be subject to a 50% reduction in corporate income tax at the statutory tax rate of 25% from the third to the fifth year, and will enjoy the benefits until the expiration of the period.

Integrated circuit production enterprises or projects that invest in newly established integrated circuits with a line width less than 65 nanometers or an investment amount exceeding 15 billion yuan after January 1, 2018, and have an operating period of more than 15 years, are exempt from enterprise income tax from the first to the fifth year, and are subject to a 50% reduction in enterprise income tax at the statutory tax rate of 25% from the sixth to the tenth year, and enjoy the benefits until the expiration of the period.

Integrated circuit production enterprises established before December 31, 2017 but not profitable with a line width of less than 0.25 microns or an investment amount exceeding 8 billion yuan, and with an operating period of more than 15 years, are exempt from enterprise income tax from the first to the fifth year of the profitable year. From the sixth to the tenth year, enterprise income tax is levied at a statutory tax rate of 25%, which is halved and enjoyed until the expiration of the period.

Integrated circuit production enterprises with a line width of less than 0.8 microns (inclusive) that were established before December 31, 2017 but did not generate profits shall be exempt from enterprise income tax from the first to second profitable years, and shall be subject to a 50% reduction in enterprise income tax at the statutory tax rate of 25% from the third to fifth year, and shall enjoy the benefits until the expiration of the period.

The notice specifies that the scope and conditions of integrated circuit production enterprises that enjoy the tax preferential policies stipulated in this notice shall be implemented in accordance with Article 2 of the "Notice of the Ministry of Finance, the State Administration of Taxation, the Development and Reform Commission, the Ministry of Industry and Information Technology on Relevant Issues Concerning Enterprise Income Tax Preferential Policies for Software and Integrated Circuit Industry" (Caishui [2016] No. 49); The second item (2) of Article 2 of the document Caishui [2016] No. 49 has been adjusted from "having a labor contract relationship" to "having a labor contract relationship or labor dispatch or employment relationship". The third item has been adjusted from "not less than 5%" to "not less than 2%" of the total annual research and development expenses to the total sales (operating) income (the sum of main business income and other business income) of the enterprise. At the same time, the enterprise should continue to strengthen its research and development activities and continuously improve its research and development capabilities.

Notice on Enterprise Income Tax Policies for Integrated Circuit Manufacturing Enterprises

Caishui [2018] No. 27

To the finance departments (bureaus), national taxation bureaus, local taxation bureaus, development and reform commissions, industry and information technology competent departments of all provinces, autonomous regions, municipalities directly under the central government, and cities specifically designated in the state plan, as well as the finance bureau, development and reform commission, and industry and information technology commission of Xinjiang Production and Construction Corps:

To further support the development of the integrated circuit industry, the following notice is hereby issued regarding issues related to corporate income tax policies:

1、 After January 1, 2018, integrated circuit production enterprises or projects that invest in newly established integrated circuits with a line width less than 130 nanometers and an operating period of more than 10 years are exempt from corporate income tax in the first two years, and are subject to a 50% reduction in corporate income tax at the statutory tax rate of 25% from the third to the fifth year, and enjoy the benefits until the expiration of the term.

2、 Integrated circuit production enterprises or projects that invest in newly established integrated circuits with a line width less than 65 nanometers or an investment amount exceeding 15 billion yuan after January 1, 2018, and have an operating period of more than 15 years, are exempt from enterprise income tax from the first to the fifth year, and are subject to a 50% reduction in enterprise income tax at the statutory tax rate of 25% from the sixth to the tenth year, and enjoy the benefits until the expiration of the period.

3、 For integrated circuit manufacturing enterprises that enjoy the tax preferential policies in Article 1 and Article 2 of this notice, the preferential period shall be calculated from the profit-making year of the enterprise; For those who enjoy the above preferential treatment according to the integrated circuit production project, the preferential period shall be calculated from the tax year in which the first production and operation income of the project is obtained.

4、 The main enterprise of the integrated circuit production project that enjoys the tax preferential policies in Article 1 and Article 2 of this notice shall meet the conditions of an integrated circuit production enterprise, and be able to separately account for and calculate the income of the project, and reasonably allocate the period expenses.

5、 Integrated circuit production enterprises established before December 31, 2017 but not profitable with a line width of less than 0.25 microns or an investment amount exceeding 8 billion yuan, and with an operating period of more than 15 years, are exempt from enterprise income tax from the first to the fifth year of the profitable year. From the sixth to the tenth year, enterprise income tax is levied at a statutory tax rate of 25%, which is halved and enjoyed until the expiration of the period.

6、 Integrated circuit production enterprises with a line width of less than 0.8 microns (inclusive) that were established before December 31, 2017 but did not generate profits shall be exempt from enterprise income tax from the first to second profitable years, and shall be subject to a 50% reduction in enterprise income tax at the statutory tax rate of 25% from the third to fifth year, and shall enjoy the benefits until the expiration of the period.

7、 The scope and conditions of integrated circuit production enterprises that enjoy the tax preferential policies stipulated in this notice shall be implemented in accordance with Article 2 of the "Notice of the Ministry of Finance, the State Administration of Taxation, the Development and Reform Commission, the Ministry of Industry and Information Technology on Relevant Issues Concerning the Enterprise Income Tax Preferential Policies for Software and Integrated Circuit Industry" (Caishui [2016] No. 49); The second item (2) of Article 2 of the document Caishui [2016] No. 49 has been adjusted from "having a labor contract relationship" to "having a labor contract relationship or labor dispatch or employment relationship". The third item has been adjusted from "not less than 5%" to "not less than 2%" of the total annual research and development expenses to the total sales (operating) income (the sum of main business income and other business income) of the enterprise. At the same time, the enterprise should continue to strengthen its research and development activities and continuously improve its research and development capabilities.

8、 The management issues related to the enjoyment of the above-mentioned corporate income tax preferential policies by integrated circuit manufacturing enterprises or projects shall be implemented in accordance with the relevant provisions of the Finance and Taxation [2016] No. 49 document and the State Administration of Taxation on handling corporate income tax preferential policy matters.

9、 This notice shall come into effect on January 1, 2018.

Ministry of Finance, State Administration of Taxation, National Development and Reform Commission, Ministry of Industry and Information Technology

March 28, 2018