Brief Introduction on the Incentive Policies on HNTEs in Beijing
- Aug 21, 2024
- Posted by: sinovestconsulting
- Category: Legal & Regulation
Brief Introduction on the Incentive Policies on HNTEs in Beijing
High and New Technology Enterprises (HNTEs) benefit from preferential tax treatment and incentive policies. These policies and treatment are designed to foster innovation and support the growth of technology-driven enterprises, which are still the main development direction in China’s the 14th five years’ strategic plan.
In this introduction, we aim to provide a quick and overall understanding on the criteria and multidimensional incentives on HNTEs in China with the most updated information. However, please note that the information could vary with the policies changes and the difference detailed implementation rules in different zones.
Under China’s Company Law which will come into effect on 1st July 2024, the companies are required to have one or two supervisor (s) or establish a board of supervisors which means at least three supervisor (s); however there are exceptions: 1) A Limited Liability Company, with the unanimous consent of shareholders or with an audit committee exercising the powers of the supervisors, may not have supervisor(s); 2) A Joint-Stock company, with an audit committee exercising the powers of the supervisors, may not have supervisor(s).
The role of the supervisor(s) is meant to enhance accountability, mitigate risks, and protect the interests of the shareholders. Taking a limited liability company as an example, the main powers and obligations of the Supervisor(s) are summarized as follows:
To qualify for HNTE status, a company must fulfill the following criteria, which are designed to ensure that the enterprise demonstrates a strong commitment to innovation and technological advancement. These criteria encompass various aspects of the company’s operations, from intellectual property ownership to R&D investment, and are intended to verify that the enterprise is both capable of and dedicated to driving high-tech development in line with national priorities. Criteria are as followed:
Quantitative Index:
- Registration: Be registered in the relevant development zones for at least one year.
- Ownership of Intellectual Property (IP): Own the IP rights for the core technology of its key products or services through independent R&D, transfer, donation, merger and acquisition, etc. (including 1st class IP rights and 2nd class IP rights).
- Core Technology: The core technology of the enterprise’s key products or services must align with the areas outlined in the Regions of Advanced Technologies Strongly Supported by the State (pls see the document sent separately).
- Technical Personnel: Technical personnel engaged in R&D and relevant technological innovation activities must constitute more than 10% of the total number of employees. At least 30% of the R&D’s employees must have college degrees or above.
- R&D Expenditure: R&D expenditure should meet certain percentages of the enterprise’s total sales revenue in the last three financial years, depending on the revenue scale. (normally no lower than 3%).
- High-Tech Related Operations: The ratio of income from high-tech related operations against total income must not be lower than 60 percent.
Other Criteria:
- Innovation Capacity Evaluation: The enterprise’s innovation capacity evaluation must meet corresponding requirements.
- Compliance Record: The enterprise must have no record of major safety or quality incidents or serious environmental violations in the year preceding the application.
These criteria establish a rigorous benchmark that ensures only the most innovative and compliant enterprises can benefit from HNTE status. Enterprises that meet these conditions can position themselves as leaders in technological development and gain a competitive edge in both the domestic and international markets.
Once these criteria have been met, enterprises can begin the certification process, which involves several key steps:
- Self-Assessment and Application: Enterprises meeting the criteria should register on the “Network for Administration of Accreditation of HNTE” (http://www.innocom.gov.cn) and submit an application for accreditation to the authority in charge. At the same time, the applicants should submit required documents that demonstrate their qualifications, such as materials related to IP, statements on the enterprise’s employee and technical personnel, financial accounting reports from the past three years, among others.
- Expert Assessment: An expert panel evaluates the declaration materials.
- Review and Public Comments: The HNTE accreditation authority examines the applications and issues an accreditation opinion for public comment.
- Accreditation and Certification: Upon no objections, the HNTE list is filed and announced, and a standardized HNTE Certificate is issued to the enterprises.
Receiving the HNTE certificate is a significant achievement for enterprises. This certification not only grants access to substantial tax benefits and financial incentives but also enhances the enterprise’s credibility in the market. With the certification in hand, companies can better position themselves to attract investment, talent, and strategic partnerships, further accelerating their growth and development.
HNTEs TAX Preferential Treatment
HNTEs TAX Preferential Treatment:
Reducing the corporate income tax (CIT) rate from the standard 25 percent to 15 percent, is one of China’s core tax incentives that encourage innovation.
Besides the lower CIT rate, starting from January 1, 2018, an additional preferential tax treatment has been granted to HNTE:
- Losses of qualified HNTE that occur five years prior to the year in which they become qualified and have not been made up – shall be allowed to be carried forward to subsequent years to be made up, and the maximum carry-forward period is up to 10 years. For normal enterprises, the maximum carry-forward period for losses is only five years.
- Enjoy a one-off pre-tax deduction for equipment and instruments (fixed assets other than houses and buildings) newly purchased during the period from October 1, 2022 to December 31, 2022, and such deduction is allowed to be 100 percent weighted.
Policies Reference:
- 《中华人民共和国企业所得税法》(中华人民共和国主席令第63号)
- 《中华人民共和国企业所得税法实施条例》(中华人民共和国国务院令第512号)
- 《财政部 国家税务总局关于高新技术企业境外所得适用税率及税收抵免问题的通知》(财税〔2011〕47号)
- 《科技部, 财政部, 国家税务总局关于修订印发<高新技术企业认定管理办法>的通知》(国科发火〔2016〕32号)
- 《科技部 财政部 国家税务总局关于修订印发<高新技术企业认定管理工作指引>的通知》(国科发火〔2016〕195号)
Other benefits granted to HNTEs include several significant advantages. Financially, companies recognized as HNTEs can receive rewards from governments at all levels, with subsidies ranging from 100,000 to 500,000 yuan available in various districts of Beijing. Additionally, HNTEs are more likely to secure venture capital investments and loans from major banks. Being classified as an HNTE also serves as a key criterion for applying for government funding support and various special funds. The HNTE status enhances a company’s brand, making it a symbol of corporate strength and often providing an edge in bidding processes. Furthermore, HNTEs benefit from talent policies, including talent introduction and residence points settlement. High-tech enterprise products are also given priority in the government procurement system.
Contact us! Experts at Sinovest are available to provide detailed policy interpretations and customized solutions for your business. We are offering comprehensive guidance on High and New Technology Enterprises Policies.
