G/SCM/Q2/CHN/66  
 
20 October 2016 
(16-5692) Page: 1/7 
Committee on Subsidies and Countervailing Measures  Origina l: English  
 
 SUBSIDIES  
REPLIES TO QUESTIONS1 FROM THE EUROPEAN UNION REGARDING  
THE NEW AND FULL NOTIFIC ATION OF CHINA2 
 
The following communication, dated 19 October 2016, is being circulated at the request of the 
delegation of China . 
 
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Question 1  
 
4  (PAGE 9) PREFERENTIAL T AX POLICIES FOR ENTE RPRISES WITH FOREIGN  
INVESTMENT  RECOGNIZED AS HIGH OR  NEW TECHNOLOGY ENTER PRISES ESTABLISHED 
IN THE STATE HIGH OR  NEW TECHNOLOGY INDUS TRIAL DEVELOPMENT ZO NES 
Can China please explain what are the sectors/products con cerned by " high or new 
technology enterprises"? Can China please provide the relevant legislation/guidelines 
on where these industries are listed?  
Could China please provide a list of the companies which have benefitted from this 
scheme?  
Could China clarif y if there is a threshold for foreign and Chinese investment to qualify 
for the preferential tax policy and, if so, what are the thresholds?  
Reply  
 
Its worth mentioning that this tax policy is a transitional preferential policy for foreign -invested 
enterpr ises after the implementation of the new Enterprise Income Tax Law in 2008, and will be 
invalidated at the expiration of the transitional period. After that, foreign -invested enterprises will 
enjoy the same preferential enterprise income tax as that for do mestic enterprises and there will 
be no tax preferential treatment tailored to foreign -invested enterprises.  With regards to the 
preferential treatment  on high or new technology enterprises , the Programme 4 and 5 have been 
merged into Programme 6 since 1 January , 2008, without differentiating the FIEs and 
domestic -invested enterprises. The preferential policy regarding high or new technology 
enterprises  in place is Programme 6.  
According to Article 4 of the Administrative Measures for Determination of High  and New Tech 
Enterprises, GUO Ke Fa Huo No. 172 [2008], a high and new tech enterprise identified under the 
Measures may apply for enjoying the preferential tax policies in pursuance of the Law of the 
People's Republic of China on Enterprise Income Tax, R egulations for the Implementation of Law of 
the People's Republic of China on Enterprise Income Tax, the Law of the People's Republic of China 
on the Administration of Tax Collection and the Detailed Rules on the Implementation of the Law of 
the People's R epublic of China on the Administration of Tax Collection.  
                                                
1 G/SCM/Q2/CHN/60.  
2 G/SCM/N/220/CHN -G/SCM/N/253/CHN -G/SCM/N/284/CHN . G/SCM/Q2/CHN/66  
 
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  According to Article 10 of the Administrative Measures for Determination of High and New Tech 
Enterprises, the following conditions shall be simultaneously satisfied for an enterprise to be 
identifi ed as a high and new tech enterprise:  
(1) The enterprise was registered within the territory of China (but excluding the enterprise 
registered in Hong Kong, China, Macao China and Chinese Taipei) and has independent intellectual 
property of the core techno logies in its key products (services) by way of independent research 
and development, acceptance of transfer, donation or merger during the recent three years, or by 
way of exclusive licensing for five years or longer;  
(2) The scientific and technical pers onnel with junior college degree or above account for over 30% 
of the total number of employees of the enterprise, of whom the research and development 
personnel account for over 10% of the total number of employees of the enterprise the same year;  
(3) The enterprise has been continuously conducting research and development activities for the 
purpose of acquiring new knowledge of science and technology (excluding humanities and social 
sciences), innovatively employing new knowledge of science and technology  or substantially 
improving the technologies or products (services), and the proportion of its total research and 
development expenditure during the recent three accounting years in its total sales revenue meets 
the following requirements:  
(a) If the sales  revenue of the enterprise during the latest year is less than 50 million yuan, 
the proportion shall not be lower than 6%;  
(b) If the sales revenue of the enterprise during the latest year is 50 -200 million yuan, the 
proportion shall not be less than 4 %;  
(c) If the sales revenue of the enterprise during the latest year is more than 200 million 
yuan, the proportion shall not be less than 3%.  
The proportion of the aggregate research and development expenditure incurred within China in 
the total research and development expenditure shall be no less than 60%. If the enterprise was 
registered less than 3 years ago, the calculation shall be based on the actual number of years of 
its business operation.  
(4) The enterprise's revenue from high and new tech products (services) accounts for over 60% of 
its total revenue during the same year; and  
(5) The enterprise's level of organizing and managing research and development, capacity of 
transforming scientific and technological achievements, number of independent intell ectual 
property rights, growth in sales and total assets as well as other indicators meet the requirements 
in the Guidelines on the Administration of Determination of High and New Tech Enterprises (to be 
formulated separately).  
 
Question 2  
 
5  (PAGE 10) PREFE RENTIAL TAX POLICIES  FOR ENTERPRISES RECO GNIZED AS HIGH 
OR NEW  TECHNOLOGY ENTERPRIS ES ESTABLISHED IN TH E STATE HIGH OR NEW 
TECHNOLOGY  INDUSTRIAL DEVELOPME NT ZONES  
Can China please explain what are the sectors/products concerned by "high or new 
technology e nterprises "? Can China please provide the relevant legislation/guidelines 
on whe re these industries are listed?  
 
Could China please provide a list of the companies which have benefitted from this 
scheme, identifying any which h ave a majority state ownershi p? 
 
Reply  
 
Its worth mentioning that this tax policy is a transitional preferential policy for foreign -invested 
enterprises after the implementation of the new Enterprise Income Tax Law in 2008, and will be G/SCM/Q2/CHN/66  
 
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  invalidated at the expiration of the transitional  period. After that, foreign -invested enterprises will 
enjoy the same preferential enterprise income tax as that for domestic enterprises and there will 
be no tax preferential treatment tailored to foreign -invested enterprises.  With regards to the 
preferen tial treatment  on high or new technology enterprises , the Programme 4 and 5 have been 
merged into Programme 6 since 1 January , 2008, without differentiating the FIEs and domestic -
invested enterprises. The preferential policy regarding high or new technolog y enterprises  in place 
is Programme 6.  
According to Article 4 of the Administrative Measures for Determination of High and New Tech 
Enterprises, GUO Ke Fa Huo No. 172 [2008], a high and new tech enterprise identified under the 
Measures may apply for enjoy ing the preferential tax policies in pursuance of the Law of the 
People's Republic of China on Enterprise Income Tax, Regulations for the Implementation of Law of 
the People's Republic of China on Enterprise Income Tax, the Law of the People's Republic of China 
on the Administration of Tax Collection  and the Detailed Rules on the Implementation of the Law of 
the People's Republic of China on the Administration of Tax Collection.  
According to Article 10 of the Administrative Measures for Determination of Hig h and New Tech 
Enterprises, the following conditions shall be simultaneously satisfied for an enterprise to be 
identified as a high and new tech enterprise:  
(1) The enterprise was registered within the territory of China (but excluding the enterprise 
registered in Hong Kong, China, Macao China and Chinese Taipei) and has independent intellectual 
property of the core technologies in its key products (services) by way of independent research 
and development, acceptance of transfer, donation or merger during t he recent three years, or by 
way of exclusive licensing for five years or longer;  
(2) The scientific and technical personnel with junior college degree or above account for 
over 30% of the total number of employees of the enterprise, of whom the research a nd 
development personnel account for over 10% of the total number of employees of the enterprise 
the same year;  
(3) The enterprise has been continuously conducting research and development activities for 
the purpose of acquiring new knowledge of science an d technology (excluding humanities and 
social sciences), innovatively employing new knowledge of science and technology or substantially 
improving the technologies or products (services), and the proportion of its total research and 
development expenditure  during the recent three accounting years in its total sales revenue meets 
the following requirements:  
(a) If the sales revenue of the enterprise during the latest year is less than 50 million yuan, 
the proportion shall not be lower than 6%;  
(b) If the sal es revenue of the enterprise during the latest year is 50 -200 million yuan, the 
proportion shall not be less than 4 %;  
(c) If the sales revenue of the enterprise during the latest year is more than 200 million 
yuan, the proportion shall not be less than 3% . 
The proportion of the aggregate research and development expenditure incurred within China in 
the total research and development expenditure shall be no less than 60%. If the enterprise was 
registered less than 3 years ago, the calculation shall be based  on the actual number of years of 
its business operation.  
(4) The enterprise's revenue from high and new tech products (services) accounts for over 
60% of its total revenue during the same year; and  
(5) The enterprise's level of organizing and managing res earch and development, capacity of 
transforming scientific and technological achievements, number of independent intellectual 
property rights, growth in sales and total assets as well as other indicators meet the requirements 
in the Guidelines on the Admin istration of Determination of High and New Tech Enterprises (to be 
formulated separately).  G/SCM/Q2/CHN/66  
 
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  Question 3  
 
6  (PAGE 11) PREFERENTI AL TAX POLICIES FOR HIGH OR NEW TECHNOLO GY 
ENTERPRISES  
Can China please explain the relationship between this scheme and those referr ed to 
above in the previous two questions? Can China please explain what are the 
sectors/products concerned by "high or new technology enterprises" ? Is this scheme 
applicable country -wide and not limited to high or new technology enterprises 
established in  the State high or new technology industrial  development zones.  Do those 
enterprises established in the State high or new technology industrial development 
zones benefit from this scheme in addition  to those schemes referred to in the previous 
two question s?  
 
Reply  
 
With regards to the preferential treatment  on high or new technology enterprises , the 
Programme  4 and 5 have been merged into Programme 6 since 1 January , 2008, without 
differentiating the FIEs and domestic -invested enterprises. The preferentia l policy regarding high 
or new technology enterprises  in place is Programme 6, which is applicable country -wide, 
regardless of whether such enterprises are established in the State high or new technology 
industrial development zones  or not.  
 
Question 4  
 
8  (PAGE 13) PREFERENTIAL  TAX POLICIES FOR ENT ERPRISES WITH FOREIG N 
INVESTMENT  ESTABLISHED IN THE C OASTAL ECONOMIC OPEN  AREAS AND IN THE 
ECONOMIC AND  TECHNOLOGICAL DEVELO PMENT ZONES  
Can China explain if this scheme relates to Chinese -foreign equity joint ventur es? Could 
China clarify if there is a threshold for foreign and Chinese investment to qualify for the 
preferential tax policy and, if so, what are the thresholds?   
 
Can China please provide a list of what enterprises qualify as " technology -intensive " and 
"knowledge intensive"  for this scheme? What are the sectors/products concerned?  
 
Reply  
 
This scheme is applicable to the Chinese -foreign equity joint ventures. Its worth mentioning that 
this tax policy is a transitional preferential policy for foreign -invested enterprises after the 
implementation of the new Enterprise Income Tax Law in 2008, and will be invalidated at the 
expiration of the transitional period. After that, foreign -invested enterprises will enjoy the same 
preferential enterprise income tax as that for domestic enterprises and there will be no tax 
preferential treatment tailored to foreign -invested enterprises.  
 
Question 5  
 
11  (PAGE 17) PREFERENTI AL TAX POLICIES IN T HE WESTERN REGIONS  
Can China explain what are the enterprises which are listed in t he Catalogue of 
Encouraged Industries in central and Western Regions? Are steel enterprises included in 
the Catalogue of encouraged industries?  If so, how many steel enterprises have 
benefitted from this scheme?  
 G/SCM/Q2/CHN/66  
 
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  Reply  
 
In terms of beneficiaries of this t ax preferential policy, enterprises engaged in the encouraged 
industries refer to those having the items included in the Catalogue of Encouraged Industries in 
Western Regions as their major business, and with the income from the major business accounting 
for over 70% of its total revenue. The Catalogue of Encouraged Industries in Western Regions is 
promulgated separately. Before its promulgation, enterprises falling within the scope of the 
Catalogue for the Guidance of Industrial Restructuring (2005 Version  and 2011 Version), 
Catalogue for the Guidance of the Foreign Investment Industries (2007 Amendment) and 
Catalogue for the Guidance of the Advantageous Industries in Central and Western Regions for 
Foreign Investment (2008 Amendment), after being confirmed  by tax authorities, may be levied a 
reduced rate of 15% of enterprise income tax. The Catalogue of Encouraged Industries in 
Western  Regions was promulgated on 20 August  2014, and went into effect on 1 October 2014. 
For details of the Catalogue, please vis it 
http://www.sdpc.gov.cn/zcfb/zcfbl/201408/t20140822_623299.html . 
 
Question 6  
 
15  (PAGE 21) PREFERENTI AL TAX TREATMENT FOR  BUILDING MATERIALS P RODUCTS 
PRODUCED WITH INTEGR ATED UT ILIZATION OF RESOURC ES 
Can China please provide a list of the raw material inputs and the products 
manufactured from those raw materials as specified in the Catalogue of Comprehensive 
Use of Resources for Preferential Enterprise Income tax treatment?  
 
Can China clarify if any steel enterprises benefit from this scheme?  
 
Reply  
 
For more information about the products, please refer to the Catalogue of Comprehensive Use of 
Resources for Preferential Enterprise Income Tax Treatment (2008 Version), Cai  Shui No. 117 of 
2008, which can be downloaded at  
http://www.chinatax.gov.cn/n810341/n810755/c1225541/content.html . 
 
Question 7  
 
27  (PAGE 32) PREFERENTI AL TAX POLICIES FOR ENTERPRISES MA KING LITTLE 
PROFITS  
Can China please provide a list of the enterprises which benefit from this scheme? What 
sectors do these enterprises operate in?  
 
Can China please clarify what is meant by "little profits"  – is there a threshold? Can 
China please clari fy what is the maximum period of time an enterprise may benefit from 
this scheme?  
 
Reply  
 
The applicable scope of the enterprises enjoying this preferential treatment is fully illustrated in 
the column  of To whom and how the subsidy is provided  of Program me 27 in Chinas notification , 
as set forth as follows:  
1) The income tax on the enterprises engaged in industries which are not restricted or prohibited 
by the State and meeting the following conditions  
a) industrial enterprises whose annual taxable income  does not exceed RMB 300,000, the 
number of employees does not exceed 100 persons, and the total value of assets does not 
exceed RMB 30 million; or b) other enterprises whose annual taxable income does not 
exceed RMB 300,000 Yuan, the number of employees d oes not exceed 80 persons, and the 
total value of assets does not exceed RMB 10 million;  
2) the enterprises listed in item 1) with an annual taxable income of no more than RMB 30,000;  G/SCM/Q2/CHN/66  
 
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  3) the enterprises listed in item 1) with an annual taxable income of no  more than RMB 60,000;  
4) the enterprises listed in item 1) with an annual taxable income of no more than RMB 100,000.  
Question 8  
33  (PAGE 37)PREFERENTIA L TAX POLICIES FOR T HE RESEARCH AND DEVE LOPMENT OF 
ENTERPRISES  
Can China please specify what enterprises i n what sectors benefit from this scheme?  
Can China provide information on the number of steel companies which have benefitted 
from this scheme?  
Reply  
According to Article 3 of the Administrative Measures for the Before -tax Deduction of Enterprise 
Researc h and Development Expenses (for Trial Implementation ) (Guo Shui Fa  No. 116 of 2008), 
research and development activities that enjoy this  tax policy refer to the continuous research and 
development activities with clear objectives conducted by enterprises f or the purpose of obtaining 
new knowledge of science or technology (excluding humanities and social sciences), creatively 
using new scientific and technological knowledge or substantial ly improving technologies, 
techniques or products (services).  The expre ssion creative use of new scientific and technological 
knowledge or substantial  improvement of technologies, techniques or products (services) means  
that enterprises have made  valuable  achievement s in innovation of  technologies, techniques and 
products (se rvices) through research and development activities, which can  promote the 
technologies and techniques in the relevant industries in the region (province, autonomous region, 
municipality directly under the Central Government or city with independent  planni ng status ) to a 
leading place, but such activities as conventional upgrading of enterprises' products (services) or 
direct application of disclosed  scientific research results and other activities (for instance, direct 
adoption of disclosed  new techniques,  materials, device s, products, services or knowledge, etc.) 
shall be excluded.  This Policy is not tailor with any specific sector or enterprise;  therefore no 
related data is available.  
Question 9  
34  (PAGE 38) PREFERENTI AL TAX POLICIES FOR ENTERPRISES TRANSFER RING 
TECHNOLOGY  
Can China please explain what is meant by transfer of technologies in the context of this 
scheme? Transfers between what parties are concerned?  
Reply  
According to the Notice on Issues Concerning Enterprise Income Tax Policies on Technology  
Transfer by Resident Enterprises  (Cai Shui No. 111 of 2010) , the transfer of technologies  includes 
the transfer , by resident enterprises , of patent technology , computer software copyright , 
integrated circuit layout -design right , new plant varieties , new b io medicine  and other t echnolog ies 
determined  by the Ministry of Finance  and the State Administration of Taxation . Patent technology  
refers to inventions, utility models, and industrial designs  more than simply changing the patterns , 
all of which have exclusive rights  granted by law. Technology transfer  in the Notice refers to the 
transfer,  by resident enterprises , of their ownership of the technology meeting the above 
requirements  or the right to use their worldwide exclusive license  for 5 years or more. 
The technology transfer  income gained by a resident enterprise  from a related party  that directly 
or indirectly holds 100% of the shares in total is not eligible for the preferential tax polic ies for 
enterprises transferring technology.  
According to the Notice on Issues Relating to Exemption and Reduction of Enterprise Income Tax 
on Income from Technology Transfer  (Guo Shui Han No. 212 of 2009), t echnology transfer s 
eligible for the preferential tax polic ies for enterprises transferring technology should mee t the 
following conditions:  G/SCM/Q2/CHN/66  
 
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  (1) The subjects of the t echnology transfer  that enjoy the preferential tax polic ies are resident 
enterprises  stipulate d in the Enterprise Income Tax Law ; 
(2) The t echnology transfer  is within the range prescribed by the Ministr y of Finance  and the State 
Administration of Taxation ; 
(3) The t echnology transfer  within Chinas mainland should be recognised by science and 
technology departments  above the provincial level;  
(4) The t echnology transfer  to the outside of Chinas mainland s hould be recognised by commerce  
departments  above the provincial level;  
(5) Other conditions provided by tax authorities under the State Council.  
Question 10  
35  (PAGE 28) RESEARCH AND DEVELOP MENT FUND FOR INDUST RIAL TECHNOLOGIES  
Can China please explain what projects in what sectors/enterprises are covered by this 
scheme? How is a project considered to be "of commonwealth or public interest" ? Are 
there published rules/guidelines and, if so, could China please provide the relevant 
reference.  
Reply  
According to the Administrative Measures of Research and Development  Fund of Industrial 
Technolog ies (MOF Circular Caijian No. 30  of 2002 ), relevant research and development projects 
refer to those  of commonweal or public interest . Enterprises engaged in approved resea rch and 
development projects of industrial technologies  may be entitled to the fund after review of 
applications or bidding procedures . Eligible enterprises shall meet the following requirements:  
(1) Registered within the territory of China with legal pers onality;  
(2) With a sound financial accounting and management system;  
(3) With a certain number of professional technicians with certain skills;  
(4) With necessary equipment for research and development;  
(5) Have achieved relevant scientific research outco mes in technology research and development;  
(6) Meeting other necessary requirements.  
Question 11  
81  (PAGE 79) SPECIAL FUND FOR THE  DEVELOPMENT OF STRAT EGIC EMERGING 
INDUSTRY  
Can China p lease explain what is meant by "strategic emerging industry" ? How and 
where are these industries defined? What are the sectors/enterprises which ha ve 
benefitted from this scheme?  
Reply  
Eligible emerging industries for this fund include energy -saving and environmental protection 
industry, new generation information technology in dustry, bio-industry, high -end equipment 
manufacturing industry, new energy industry, new materials industry, new energy vehicle 
industry, etc.  
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