China Clarifies Preferential CIT Rate for High-Tech Enterprises

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Jun. 10 – On May 31, 2011, China’s Ministry of Finance and the State Administration of Taxation jointly issued the “Circular on the Applicable Tax Rate and the Tax Deduction and Exemption for the Offshore Income of High and New Technology Enterprises (Caishui [2011] No. 47).” According to the Circular, high and new-technology enterprises refer to enterprises that have already obtained the high and new-technology enterprise certification and are currently enjoying the 15 percent preferential CIT rate. For these enterprises, their offshore income is also entitled to the 15 percent preferential CIT rate.

When calculating their foreign tax credit limit, the 15 percent preferential tax rate can be applied when calculating the total taxable amount both within and outside of China.

The Circular is effective retroactively from January 1, 2010.

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