The High- and New-Technology Enterprise (HNTE) status is one of China’s core innovation tax policies under China’s Corporate Income Tax Law. The concept of HNTE status emerged in the 1990s to encourage investment in high-tech and R&D areas through a series of benefits including fiscal and tax incentives. The HNTE status offers qualified companies a significant reduction of the Corporate Income Tax (CIT) rate.
- Reduction of the Corporate Income Tax (CIT), from the standard 25% tax rate to 15%, regardless of the company’s investment type and where its headquarters are located.
Once approved, the HNTE status will last for three years, after which the application needs to be re-submitted.
According to the latest revision of the Management Measures for the Recognition of High- and New-Technology Enterprises issued in January 2016 by MOST, MOF and SAT, enterprises must meet the following requirements in order to qualify to HNTE status:
- Being registered in Mainland China for at least one year before the application is submitted
- Own IP rights of the key technologies which show core support to the enterprise’s main products (services). Such rights may be obtained through independent R&D, transfer, donation, or mergers and acquisitions;
- The technologies which show core support to the enterprise’s main products (services) shall belong to one of the areas outlined in the Catalogue of High- and New-Technology Areas Specifically Supported by the State
- At least 10% of the total number of the enterprise’s employees should be engaged in R&D and related activities
- R&D expenditures in the last three financial years should account to a certain percentage of the enterprise’s total sales revenue in the same period:
- Over 5% if total revenue is below 50 million RMB;
- Over 4% if total revenue is between 50 and 200 million RMB;
- Over 3% if total revenue exceeds 200 million RMB.
In addition, at least 60% of the enterprise’s total R&D expenditure must be incurred in China
- Income derived from high- and new-technology products (services) should amount to at least 60% of the enterprise’s total revenue
- The assessment of the enterprise’ innovation capabilities is in line with relevant standards
- The enterprise should have not occurred any major safety or quality incident in the previous year, and should have not had any behaviour against the law
Date of publication
29 May 2019
Deadline for submitting applications
The application period is divided in two batches:
Applicants must first conduct a self-evaluation of the eligibility criteria, and upload it through its account on the national HNTE Certification Management Platform. The applicant will then receive a 22-digit code by relevant authorities if the self-evaluation is compliant with the eligibility criteria for HNTE status.
Once approved, the official application must be submitted on the HNTE Recognition Management Platform (Innocom website).
Domestic and foreign-invested enterprises (FIEs) are equally eligible to apply as long as they comply with the requirements listed above. However, it is commonly believed that the eligibility requirements might be more challenging to meet for FIEs. *
Figures, however, show that FIEs are actively participating in the programme in Zhejiang province. A good proportion (around 6%) of the 4,455 approved HNTEs in 2018 were foreign-invested enterprises, including many wholly foreign-owned enterprises, the majority of which being American, German and Taiwanese. A few examples can be found in the dedicated page on this website (link below).
* Note: for instance, The European Union Chamber of Commerce in China in its Position Papers argues that the requirement on core IP may create an uneven playing field between domestic and international companies. This would be because the main technologies of the Chinese affiliates of foreign companies in part may still rely on the main technologies and products initially developed outside China and is still owned there, despite these companies now playing an increasingly important role in the Chinese innovation ecosystem.