State Council Unveils Policies to Spur Growth of Chinese Semi-conductor Industry via Tax Cuts

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China’s State Council has just released a raft of new policies for driving the growth of the domestic semi-conductor sector in the wake of sanctions against tech companies imposed by the US.

On 4 August the State Council issued the “Several Policies for Expediting High-quality Growth of the Integrated Circuit Sector and Software Sector in a New Era” (新时期促进集成电路产业和软件产业高质量发展的若干政策).

According to the State Council the new Policies are for the purpose of “further optimising the integrated circuit sector and software sector development environment, deepening international industry cooperation, and raising industry innovation capability and the quality of development.”

In the realm of finance the current policies now include:

  • For IC production enterprises or projects at 65nm or less whose operating term is over 15 years, exemptions from enterprise income tax from the 1st to 5th year, and a 50% tax reduction for the 6th to 10th year;
  • For IC production enterprises or projects at 130nm or less, and whose operating term is over 10 years, exemptions from enterprise income tax from the 1st to 2nd year, and a 50% tax reduction for the 3rd to 5th year;
  • For IC production enterprises or projects at 28 nm or less, and whose operating term is over 15 years, exemptions from enterprise income tax from the 1st to 10th year.

The period for preferential policies are now also calculated from the year that profits are first earned by enterprises, or revenues are first collected for projects.

China will also continue to provide enterprise income tax exemptions from the 1st to the 2nd year, and a halving for such taxes from the 3rd to the 4th year, to companies involved with IC design, equipment, materials nd testing, and software enterprise.

In addition to this, the new policies will provide enterprise income tax exemptions from the year that profits are first obtained by key IC design and software companies, with enterprise income taxes to be collected at an annual rate of 10% subsequently.

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