From Cover, issue no. 343, Nov 26th 2007
Original article: [Chinese]

Wang Biqiang reveals more regarding the latest draft of the Corporate Tax Law Details, which will clarify many of the ambiguities present in its parent law passed earlier this year. This is the second of a two-part series. The first can be found here.

Third suspense:?qualifying as a high-tech enterprise

?“The 15 percent tax rate offered to high-tech enterprise is very attractive when compared to the?25 percent one demanded of other businesses,” Wu Jiayuan said, “As a result, many?would like to seek?high-tech status.”
This preferential tax is found in the second clause of 28th article. But it doesn’t define high-tech firms, or offer any concrete criterion to be met.

The details clarify this. Research and development costs are a major factor in gaining recognition. In the former draft, the high-tech enterprises were those:

● With annual sale revenue above 200 million yuan, research and development fees must stand at least 3 percent of their annual gross income;
● with annual sale revenue between 50 million and 200 million yuan, research and development fees should stand at above 4 percent of their annual gross income;
● with annual sale revenue under 50 million yuan, research and development fees should stand at least 6 percent of their annual gross income.

The prior draft also states that high-tech enterprises must satisfy the following conditions, which were laid out in a special “Nationally Supported High-tech” area:

● the enterprises’ revenue from product and technology sale should occupy at least 60 percent of their annual gross income;
● employees with with bachelor's degrees or above should occupy more than 30 percent of the enterprise’s total employees;
● technicians should occupy more than 20 percent of the enterprise’s total employees.

The State Council's legislative affairs office deleted specific proportion requirements before submission to the State Council. This indicates the possibility that the State Council and the State Tax Bureau will release such conditions at a later date.