As a supplement to our China Tax Alert, China Tax Bulletin aims to provide on a bi-monthly basis a high level overview on the latest tax rules released by various authorities, especially those by China SAT and local tax authorities and the implications for businesses.

1. 1China tax bulletin
Issue 1 April 2016
Corporate Income Tax (“CIT”)
Notice regarding the Amended
Administrative Measures for
Assessment of High and New
Technology Enterprises (HNTEs)
(Guokefahuo [2016] No. 32)
With the State Council executive meeting
presided over by Premier Li Keqiang
on 13 January 2016, the Ministry of
Finance (MOF), State Administration
of Taxation (SAT) and Ministry of
Science and Technology (MOST)
jointly released the Notice regarding the
China tax bulletin
Amended Administrative Measures for Assessment of High and New Technology
Enterprises (HNTEs) (Guokefahuo [2016] No. 32) (hereinafter referred to as
“Circular 32”). Circular 32 replaces the previous regulations and measures including
Guokefahuo [2008] No.172 (Circular 172) and Guokefahuo [2008] No.362 (Circular
362) regarding the measures and assessment system of the HNTEs, and the key
amendments are summarized as follows.
• Criteria for recognition of HNTEs
Circular 32 Circular 172
Acquisition
of intellectual
property rights
The enterprise must obtain the
ownership of intellectual property
rights which plays a key supporting
role in its main products or services by
way of self-development, assignment,
endowment, merger and acquisition (of
another entity), etc.
The “three-year” limitation is removed,
which means an enterprise may apply
for the HNTE status with intellectual
property rights acquired exceeding three
years ago. And the exclusive licensing is
no longer qualified.
The domestic enterprise must own
the independent intellectual property
rights for the core technology of its
key products (services) by way of self-
development, assignment, endowment,
merger and acquisition, etc. during the
past three years or through exclusive
licensing for more than five years.
Applicable
scope of
technology
The technologies playing core
supporting role in enterprise products
(services) fall under the scope stipulated
in the Regions of Advanced Technologies
Strongly Supported by the State.
More attention is paid to technologies
replacing products or services.
The products (services) fall under
the scope stipulated in the Regions
of Advanced Technologies Strongly
Supported by the State.

2. 2China tax bulletin
Circular 32 Circular 172
Personnel
constitution
The scientific and technical personnel
engaged in research and development
(R&D) as well as related technological
innovation activities constitute no less
than 10% of the total headcount of
enterprise in the current year.
The requirement for education
background of the scientific and
technical personnel is removed.
The scientific and technical personnel
with college education and above
constitute more than 30% of the
total headcount of enterprise in the
current year; and the research and
development personnel constitute
more than 10% of the total headcount
of enterprise in the current year.
Requirement of
proportion of
R&D expense
in total sales
revenue within
the past three
fiscal years
The proportion shall not be less than
5% for enterprises whose sales revenue
in the recent year is less than RMB 50
million.
The proportion is decreased which
means comparatively more enterprises
will be qualified to satisfy this criterion,
and the applicable range will expand.
The proportion shall not be less
than 6% for enterprises whose sales
revenue in the recent year is less than
RMB 50 million.
• Simplification of recognition and administration process
A public announcement of HNTEs assessed by accredited institutions shall be public
on the "Network for Administration of Assessment of HNTEs" for 10 working
days replacing the previous 15 working days.
The affirmation, publicity and record-filing are cancelled for name alteration of a
HNTE, and a new qualification certification with the same serial number and validity
period will be issued directly.
Circular 32 tends to replace the re-assessment process for expiration of the
HNTE certification with requiring the HNTEs to fill in the annual development
forms via the Network for Administration of Assessment of HNTEs by the end of
May yearly after obtaining the qualification certificate.
• Enhancement of supervision and management
An administration mechanism of random and key examination for assessment and
successive management of HNTEs will be established to strengthen the supervision
and administration of HNTEs.
The articles regulating the disqualification of HNTEs are remained and revised
slightly by deleting tax evasion or fraud and adding failure to report significant
changes relevant to assessment criteria timely.
The release of Circular 32 is keeping pace with the development of technological
field, covering more new technologies in Regions of Advanced Technologies
Strongly Supported by the State, offering more support and opportunity for small or
middle-sized enterprises. The renewal of the criteria and procedure would promote
more enterprises to obtain the HNTE qualification and enjoy the tax incentives.
Meanwhile, the applicant needs to pay attention to the successive qualification
maintenance to avoid being revoked.
Announcement of Revisions of
Annual Corporate Income Tax (CIT)
Returns (Type A, Version 2014) (SAT
Announcement [2016] No. 3)
With the application of 2014 version
of annual CIT returns by taxpayers,
the State Administration of Taxation
decided to make partial revisions to the
annual CIT returns in Announcement
of Release of PRC CIT Annual
Returns (Type A, Version 2014) (SAT
Announcement [2014] No. 63) via
issuing Announcement of Revisions of
Annual Corporate Income Tax (CIT)
Returns (Type A, Version 2014) (SAT
Announcement [2016] No. 3) to facilitate
the below tax preferential policies:
-- Low tax rate and taxable income
exemption applicable to qualified
small low-profit enterprises;
-- Accelerated depreciation of fixed
assets applicable to enterprises in key
fields (industries); and
-- Tax exemption/reduction on transfer
of exclusive right to use licensed
technology for at least five years.

3. 3China tax bulletin
The key revisions of returns along with instructions are summarized as below:
SAT Announcement [2016] No. 3 SAT Announcement
[2014] No. 63
A000000 -
Enterprise Basic
Information Form
Instruction regarding No. 103 – Industrial code:
the small low-profit enterprise with industry
code 06** to 4690 shall be deemed as an
industrial enterprise except for construction
industry – to clarify the understanding of
industrial enterprise by excluding some
industries.
Instruction regarding No.
103 – Industrial code: the
small low-profit enterprise
with industry code 06** to
4690 shall be deemed as
an industrial enterprise.
No. 107 - Taxpayers engaging in industries
restricted or prohibited by national policies – to
avoid confusion between either and neither.
No. 107 - Taxpayers
engaged in industries not
restricted or prohibited by
the State.
A105081 -
Detailed Form for
the Accelerated
Depreciation/
Deduction of Fixed
Assets
New version – to disclose more financial
and other information related to accelerated
depreciation/deduction including book-to-tax
consistence and reasons for acceleration, etc.
Old version.
A107020 - Detailed
Form for Exemption/
Reduction of Taxable
Income
Delete the instruction according to
Announcement on Issues Relating to Corporate
Income Tax on Income Derived from Transfer
of the right to use Licenced Technology (SAT
Announcement [2015] No. 82).
Instruction regarding
global exclusive license.
A107030 - Detailed
Form for Credits
to Offset Taxable
Income
A107040 -
Detailed Form for
CIT Reduction/
Exemption
New version – to categorize different situations
or cover more details.
Old version.
Others More specified instructions
Taxpayers shall keep attention to any further notice issued by the tax authorities to
learn more about details and key points for CIT annual filing for 2015 fiscal year.
Value-added Tax (“VAT”)
Notice regarding simplification and reduction of tax filing frequencies for
taxpayers (SAT Announcement [2016] No. 6)
• Small-scale Value-added Tax (VAT) taxpayers, in principle, shall file VAT,
Consumption Tax (CT), Cultural Construction Fee (CCF) as well as the Urban
Maintenance and Construction Tax (UMCT), Education Surcharge (ES) that
are levied on VAT and CT payables, on a quarterly basis. If required by a
taxpayer not to file quarterly, the competent tax authorities may assess a proper
and reasonable tax filing period based on tax payables.
• Nil filing is not necessarily required for UMCT, ES that are levied on VAT and
CT payables.
• Qualified small low-profit enterprises shall conduct CIT filing on a quarterly
basis.
• Taxpayers, filing fixed tax amounts regularly by adopting simplified tax filing
method, may choose not to perform return filing procedures, and settle their
tax payment through the electronic tax payment system under the Finance-
Tax-Exchequer-Bank System (财税库银电子缴税系统) or via authorized banks
within the prescribed deadline.
The aforementioned simplification practice would provide more feasibility in
tax filing for taxpayers, and reduce unnecessarily administrative procedures and
formalities for both taxpayers and authorities.
Notice regarding expanding the
exemption scope for certain
governmental funds (Caishui [2016]
No. 12)
The criteria of taxpayers applicable to/
qualified for enjoying tax exemption of
ES, Local Education Surcharge and water
resource construction fund updates by
increasing the exemption thresholds of
turnover from RMB 30,000 per month
(or RMB 90,000 per quarter) to RMB
100,000 per month (or RMB 300,000 per
quarter).
Notice regarding issues concerning
further strengthening the interim and
post-event supervision on export tax
refund/exemption (SAT Announcement
[2016] No. 1)
The SAT released SAT Announcement
[2016] No. 1 (SAT Announcement [2016]
No. 1) on 7 January 2016 to clarify the
issues concerning further strengthening
the interim and post-event supervision
on export tax refund/exemption.
The SAT Announcement [2016] No.
1 simplifies the statutory documents
required for import customs declaration
for tax refund/exemption for re-export
of import commodities by foreign
trade enterprises, improve the record
filing formalities for export tax refund/
exemption concerning below situations:
• The head office or manufacturing
enterprises held by group
corporation are qualified to enjoy
the tax preferential treatment of
VAT Exemption, Credit and Refund
(“ECR”) for purchased commodities
that are deemed as self-produced;
• Export enterprises or other entities
withdraw their record filings for
export tax refund/exemption

4. 4China tax bulletin
China tax bulletin
China tax bulletin are issued in summary
form exclusively for information of clients
and staff of Grant Thornton and should not
be used or relied upon as a substitute for
detailed professional advice. Accordingly
Grant Thornton accepts no responsibility
for any loss that occurs to any party who
acts on the information contained herein
without further consultation with us.
Contacts
Shanghai
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Partner
T +86 21 2322 0298
M +86 136 1186 2116
E rose.zhou@cn.gt.com
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Partner
T +86 21 2322 0240
M +86 138 1650 3240
E roy.zhang@cn.gt.com
Beijing
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Partner
T +86 10 8566 5828
M +86 139 0118 6670
E wilfred.chiu@cn.gt.com
Julie Zhang
Partner
T +86 10 8566 5777
M +86 135 0138 6998
E julie.zhang@cn.gt.com
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authorities by submitting the record
filing forms for the installment IIT
payment within 15 days of the next
month after exercising the stock options
or subscribing stocks.
• Subsequent administration of
cancelling administrative approval
requirements on IIT calculation
methods applicable to law firms
Following up with the abolition of
Article 31 of Notice regarding the
reinforcement of IIT collection on an
actual basis from investors of law firms
or other agencies (Guoshuifa [2002]
No. 123), the subsequent administration
shall be enforced according to Notice
regarding the IIT collection on investors
of sole proprietorship enterprises and
partnerships (Caishui [2000] No. 91) and
the People’s Republic of China (PRC)
Tax Collection and Administration Law
and its implementation rules.
Individuals in scientific institutions,
advanced education institutes or award
winners, who transform scientific and
technological achievements to obtain
shares or equity, should complete
the record filing with the competent
tax authorities by submitting the
record filing forms for temporary
IIT exemption on income derived
from transformation of scientific and
technological achievements within 15
days of the next month after obtaining
the awards.
• Subsequent administration of
cancelling administrative approval
requirements on installment IIT
payment for exercising the stock
option rights or on discounts and
allowances derived from shares
subscribed
Should individual taxpayers apply
for installment IIT payment for
the aforementioned income, their
withholding agents should perform the
record filing with the competent tax
Individual Income Tax (“IIT”)
Notice regarding the subsequent
administration of cancelling
administrative approval requirements
for three Individual Income Tax (“IIT”)
related items (SAT Announcement
[2016] No. 5)
According to Implementations on Notice
of Decision of State Department to
abolish 62 items subject to administrative
approval of local governments as
designated by the central government
(Shuizongfa [2015] No. 141), the State
Administration of Taxation (SAT)
released SAT Announcement [2016]
No. 5 (Announcement 5) to specify the
subsequent administration of cancelling
administrative approval requirements
for three IIT related items on 28 January
2016. The effective date of announcement
is exactly the release day.
The three IIT related items are as below:
• Subsequent administration of
cancelling administrative approval
requirements on temporary IIT
exemption on income derived from
transformation of scientific and
technological achievements