Tax Preference Guideline Provides Objective Scrutiny for High/New-tech Enterprises
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clpstaff &clp articlesChina has further clarified tax preferences for high- and new-technology enterprises (HNTEs) in a recent Working Guideline. Applicants that can satisfy tougher and more precise qualification criteria will benefit from clear and objective evaluation procedures, but must be prepared for broad scrutiny of their tax and legal compliance. HNTE status can be lost through business changes including mergers or acquisitions.
By Neal Stender, Forrest Ye and Cindy Gong of Orrick, Herrington & Sutcliffe (Hong Kong, Beijing and Shanghai).
The tax-preferred status of a high- and new-technology enterprise (HNTE), which is available to both foreign- and domestically-invested enterprises, is covered by clearer qualification criteria, procedures, benefits, burdens and risks, along with numerical formulae and related procedures designed to maximize objective and fair governmental decision-making. This is a significant part of the trend towards narrowing the tax preferences available to foreign invested enterprises (FIEs), which could previously qualify easily for the production-oriented status that is now being phased out. The only FIEs able to qualify as HNTEs are those able to localize their group's intellectual property ownership, to document their continuous investment in research and development projects, and to maintain a high level of compliance with a broad range of tax and legal requirements.
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