Clarification on Corporate Income Tax (CIT) Incentives for Advanced Technology Service Enterprises (ATSE)

The Ministry of Finance, the State Administration of Taxation, the Ministry of Commerce, the Ministry of Science and Technology and the National Development and Reform Commission jointly issued Caishui 2014 No. 59 (Circular 59) on 8 October 2014. Regarding the CIT incentives for ATSE, Circular 59 updates Circular 65 by extending the incentive expiration date to 31 December 2018 and relaxing recognition criteria on income derived from offshore outsourcing service.

The key contents of the Circular 59 are:

From 1 January 2014 to 31 December 2018, the preferential corporate income tax treatment is continued in 21 trial cities:

  • Reduced corporate income tax of 15%
  • The maximum rate of the deductible employee education expenses is 8%of the total salary expenses and the excess portion can be carried forward to the next years.

Qualifying enterprises shall meet the following criteria:

  • The service rendered by the enterprises shall fall within the list of qualifying advanced technology service
  • The registered address and operating location must be in one or more of the 21 trial cities
  • The ATSE must have a legal personality
  • At least 50% of the total employees have associate degree or above
  • Revenue derived from advanced technology services is more than 50% of the total revenue of the year
  • Revenue derived from the qualified offshore advanced technology outsourced services shall account for no less than 35% of the total revenue of the year

Notes: The 21 trial cities include Beijing, Tianjin, Shanghai, Chongqing, Dalian, Shenzhen, Guangzhou, Wuhan, Harbin, Chengdu, Nanjing, Xi’an, Ji’nan, Hangzhou, Hefei, Nanchang, Changsha, Daqing, Suzhou, Wuxi and Xiamen.