Laws of the People's Republic of China

Circular of the Ministry of Finance, the State Administration of Taxation, the Ministry of Commerce and the Ministry of Science and Technology on Relevant Policies Concerning the Pilot Program on Encouraging the Development of Technically Advanced Service Enterprises in Suzhou Industrial Park

Cai Shui [2006] No. 147

The Bureau of Finance of Jiangsu province, state taxation bureaus, local taxation bureaus, departments of foreign trade and economic cooperation, commissions of trade and economy, departments of science and technology, and administration committee of Suzhou Industrial Park:

For the purpose of further improving the policy-supporting system of high-tech industry, pushing forward the development of technically advanced service enterprises, promoting the elevation of technological innovation and technical service capabilities of enterprises, enhancing the comprehensive competitiveness of high-tech industry in China, and in accordance with the spirit of relevant decisions by the State Council, the related supporting policies concerning the pilot work on encouraging the development of technically advanced service enterprises in Suzhou Industrial Park are herby notified as follows:

Article 1

Supporting Policies on pilot technically advanced service enterprises

1.

As of July 1, 2006, the scope of ascertainment of high-tech enterprises in Suzhou Industrial Park shall be enlarged and technically advanced service enterprises that conform to the conditions provided by Article 3 of the present Circular shall be ascertained as high-tech enterprises.

2.

As of July 1, 2006, the enterprise income tax of domestic or foreign-invested technically advanced service enterprises ascertained as high-tech enterprises shall be taxed at the reduced rate of 15%.

3.

As of July 1, 2006, the reasonable actual wage expenses in technically advanced service enterprises ascertained as high-tech enterprises may be deducted before the enterprise income tax.

4.

As of July 1, 2006, as regards the employee education expenses drawn and actually used by technically advanced service enterprises, the part that is not more than 2.5% of the total wages that year may be deducted before the enterprise income tax.

5.

As of July 1, 2006, technically advanced service enterprises ascertained as high-tech enterprises may enjoy relevant preferential policies for high-tech enterprises except taxation policies.

Article 2

Scope of Pilot Technically Advanced Service Enterprises

1.

Software development and service enterprises: including the development of industry application software, embedded software and customized software, as well as software technical service, etc.

2.

Product technological development and industrial design service enterprises: including the development of product production technologies, the design of outward appearances of products, the design of structure as well as mold design service, etc.

3.

Information technology development service enterprises: including the design of integrated circuit products, system integration as well as the offering of E-commerce platform and integrated circuit tests service, etc.

4.

Information technology outsourcing service enterprises: including system operation, system application and fundamental information technology outsourcing service, etc.

5.

Technological business flow outsourcing service enterprises: including the offering of design of business flow to other enterprises, as well as database management such as data integration, data processing and data analysis concerning internal management of enterprises, business operation and supply management, as well as information service, etc.

See the Appendix for detailed information on the scope of application of the above-mentioned development service, product technological development and industrial design service, information technology development service, information technology outsourcing service and technological business flow outsourcing service.

Article 3

The Ascertainment and Administration of Pilot Technically Advanced Service Enterprises

1.

The ascertaining conditions of technically advanced service enterprises that are to enjoy pilot policies

The technically advanced service enterprise that is to enjoy pilot policies shall satisfy the following conditions:

(1)

It shall engage in one or two of the businesses that fall within the scope provided by Article 2 of the present Circular.

(2)

The registration place of the enterprise and working site shall be within the Suzhou Industrial Park.

(3)

It boasts corporate capacity and bears no law-violating activities in the recent two years in import and export business management, financial management, taxation management, foreign exchange management and Customs management with the business stably improving.

(4)

Employees with junior college diploma or above thereof shall account for more than 70% of the total number of employees.

(5)

The income obtained by the enterprise from business within the scope provided by Article 2 of the present Circular shall account for more than 70% of the total income of the enterprise that year.

(6)

Enterprises that engage in outsourcing service shall bear relevant international qualification certifications and sign outsourcing service contracts with overseas customers. In addition, the income from international (FOB) outsourcing business offered to overseas customers shall not be less than 70% of the total income of the enterprise that year.

2.

Administration of Ascertainment of Pilot Technically Advanced Service Enterprises

(1)

The science and technological authorities of Jiangsu province, jointly with the financial, taxation and commercial authorities at the provincial level shall, in accordance with the provisions of the present Circular, formulate concrete administrative measures and submit them to the Ministry of Science and Technology, the Ministry of Finance, the State Administration of Taxation and the Ministry of Commerce for record.

(2)

The technically advanced service enterprise that conform to the above-mentioned conditions shall, in accordance with the provisions of the present Circular and the Administrative Measures, file an application to the administrative committee of Suzhou Industrial Park who shall submit it to the scientific and technological, taxation as well as commercial authorities of Jiangsu province for examination and approval. In case the application is approved, the scientific and technological, taxation as well as commercial authorities of Jiangsu province shall jointly ascertain the enterprise as a high-tech enterprise. The name list of the ascertained enterprises shall be submitted on a timely basis to the Ministry of Science and Technology, the Ministry of Finance, the State Administration of Taxation and the Ministry of Commerce for record.

(3)

The technically advanced service enterprise that has been ascertained shall, with relevant ascertaining documents, handle matters like tax reduction and tax exemption with local taxation authorities.

(4)

The administrative committee of Suzhou Industrial Park jointly with the scientific and technological, taxation as well as commercial authorities thereof shall make follow-up administration on the ascertained technically advanced service enterprises that enjoy pilot policies. As regards enterprises that alter the business scope, merge with or separate from other entities, change their production line or re-domicile, if the ascertaining conditions are not satisfied, the qualification to enjoy pilot policies shall be cancelled on a timely basis upon approval by authorities at a higher level.

Article 4

The administrative committee of Suzhou Industrial Park jointly with the scientific and technological, taxation as well as commercial authorities thereof shall deliberately carry out the provisions of the present Circular, undertake communication and coordination with earnest efforts, and in accordance with the pilot implementation, try every effort to investigate into the concrete technical standards of technically advanced service enterprises so as to further improve relevant policies. Any problem encountered during the pilot work, shall be reported on a timely basis to the Ministry of Science and Technology, the Ministry of Finance, the State Administration of Taxation and the Ministry of Commerce level by level.

Article 5

After the above pilot policies came into effect, provided that the State undergo tax system reform or adjust relevant policies, the new policies shall prevail.

Appendix:

The Scope of Ascertainment of Technically Advanced Service Enterprises in Suzhou Industrial Park (on Trial)

Ministry of Finance

State Administration of Taxation

Ministry of Commerce

Ministry of Science and Technology

December 31, 2006

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Appendix:

The Scope of Ascertainment of Technically Advanced Service Enterprises in Suzhou Industrial Park (on Trial)

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1. Software Development and Service

2. Product technological development and industrial design service

3. Information technology development service

4. Information technology outsourcing service

5. Technological business flow outsourcing service