Promulgation Authorities： State Council
Release Date： 2020.07.27
Effective Date： 2020.07.27
Doc Number： Guo Fa [2020] No.8
Notice of the State Council on Promulgation of Several Policies for Promoting the High-quality Development of Integrated Circuit and Software Industries in the New Era
Guo Fa [2020] No.8
The people's governments of all provinces, autonomous regions and municipalities directly under the Central Government, and all ministries and commissions of and all agencies directly under the State Council,
The Several Policies for Promoting the High-quality Development of Integrated Circuit and Software Industries in the New Era are hereby promulgated for your implementation.
State Council
July 27, 2020
Several Policies for Promoting the High-quality Development of Integrated Circuit and Software Industries in the New Era
Integrated circuit (IC) industry and software industry are the core of information industry and the key force to lead a new round of scientific and technological revolution and industrial transformation. Since the promulgation of the Notice of the State Council on Promulgation of Several Policies for Encouraging the Development of Software and Integrated Circuit Industries (Guo Fa [2000] No.18) and the Notice of the State Council on Promulgation of Several Policies for Further Encouraging the Development of Software and Integrated Circuit Industries(Guo Fa [2011] No.4), China's IC industry and the software industry have developed rapidly, strongly supporting the national informatization construction and promoting the sustainable and sound development of the national economy and society. In order to further optimize the development environment for the IC industry and software industry, deepen international industrial cooperation, and improve industrial innovation capability and development quality, the following policies are formulated.
I. Fiscal and Taxation Policy
1. An IC manufacturer or project encouraged by the State to manufacture ICs with a linewidth of less than 28 nanometers (inclusive) and an operation period of more than 15 years are exempted from corporate income tax (CIT) from the first to the tenth year. CIT will be exempted for the first five years and will be reduced by half from the sixth to the tenth year at the statutory rate of 25% for an IC manufacturer or project encouraged by the State to produce ICs with a linewidth of less than 65 nanometers (inclusive) and an operation term of more than 15 years. CIT will be exempted for the first two years and will be reduced by half from the third year to the fifth year on the basis of the statutory tax rate of 25% for an IC manufacturer or project encouraged by the State to produce ICs with a linewidth of less than 130 nanometers (inclusive) and an operation term of more than 10 years. Where an IC manufacturer is encouraged by the State to produce ICs with a linewidth of less than 130 nanometers (inclusive), losses incurred in a taxable year are allowed to be carried forward to the following years, but the maximum period for carrying forward shall not exceed ten years.
Where such IC manufacturer is entitled to the preferential tax policies, the period of tax preference shall be calculated from the profit-making year; where such IC production project is entitled to the preferential tax policies, the period of tax preference shall be calculated from the taxable year in which such project obtains the first sum of production and operation income. The list of IC manufacturers or projects encouraged by the State shall be formulated by the National Development and Reform Commission and the Ministry of Industry and Information Technology jointly with the relevant authorities.
2. Enterprises engaged in IC design, equipment, materials, packaging and testing and software enterprises that are encouraged by the State are exempted from corporate income tax in the first and second years from the year when they begin to make profits, and shall pay corporate income tax reduced by half at the statutory tax rate of 25% in the third to fifth years. The conditions for enterprises engaged in IC design, equipment, materials, packaging and testing encouraged by the State shall be formulated by the Ministry of Industry and Information Technology together with relevant authorities.
3. Key IC design enterprises and software enterprises encouraged by the State are exempted from corporate income tax from the first to the fifth year from the profit-making year and shall be subject to corporate income tax at a reduced tax rate of 10% for subsequent years. The list of key IC design enterprises and software enterprises encouraged by the State shall be formulated by the National Development and Reform Commission and the Ministry of Industry and Information Technology in concert with the relevant authorities.
4. The eligibility for and scope of preferential policies on income tax to be implemented by the state for IC enterprises or projects and software enterprises will be adjusted from time to time according to the progress of industrial technologies. The corporate income tax of IC design enterprises and software enterprises for previous years before the entry into force of these Policies are entitled to the preferential policy of "exemption for two years and 50% reduction for three years" specified in the Document Guo Fa [2011] No. 4.
5. Preferential VAT policies for IC enterprises and software enterprises shall continue to be implemented.
6. Within a certain period of time, enterprises producing logic circuits with a linewidth of less than 65 nanometers (inclusive) and memory devices and enterprises producing featured ICs with a linewidth of less than 0.25 microns (inclusive) (including enterprises producing masks and silicon wafers of 8 inches or more) are exempted from import tariffs on the import of raw productive materials for self-use and consumables, special building materials for a clean room, supporting systems, and spare parts for IC production equipment; enterprises producing compound ICs with a linewidth of less than 0.5 microns (inclusive) and advanced packaging and testing enterprises are exempted from import tariffs on the import of raw productive materials for self-use and consumables. Specific policies shall be formulated by the Ministry of Finance in conjunction with the General Administration of Customs and other authorities concerned. The lists of enterprises and duty-free goods shall be respectively formulated by the National Development and Reform Commission and the Ministry of Industry and Information Technology in concert with the relevant authorities.
7. Within a certain period, the equipment for self-use imported by key IC design enterprises and software enterprises encouraged by the State, and the IC manufacturers and advanced packaging and testing enterprises mentioned in Article 6, as well as the technology (including software), accessories and spare parts imported along with the equipment in accordance with the contract are exempted from import tariff, except for the commodities listed in the relevant catalogue of import commodities not exempt from tariff. Specific policies shall be formulated by the Ministry of Finance in conjunction with the General Administration of Customs and other authorities concerned.
8. For new equipment imported for a key IC project within a certain period, the import VAT may be paid by installments. Specific policies shall be formulated by the Ministry of Finance in conjunction with the General Administration of Customs and other authorities concerned.
II. Investment and Financing Policies
9. It is required to strengthen the services and guidance for the construction of major IC projects, orderly guide and regulate the development order of the IC industry, make a planning and layout, strengthen risk warning and avoid low-level repeated construction.
10. The IC enterprises and software enterprises are encouraged and supported to strengthen resource integration. The relevant departments of the State Council and local governments shall actively support and guide restructuring and merger carried out by enterprises pursuant to the market-oriented principle, and shall not impose restrictive conditions in any form other than those stipulated by laws, regulations and policies.
11. We should make full use of existing national and local government investment funds to support the development of the IC industry and software industry, encourage social capital to raise funds through various channels in accordance with the market-oriented principle, establish investment funds and improve the market-oriented level of funds.
12. Local governments are encouraged to establish a loan risk compensation mechanism to support IC enterprises and software enterprises to obtain commercial loans by means of intellectual property pledge financing, equity pledge financing, accounts receivable pledge financing, supply chain finance, science and technology and intellectual property insurance, etc. The role of financing guarantee institutions shall be brought into full play to actively provide financing guarantee services in various forms for small and micro enterprises in the IC and software fields.
13. Commercial financial institutions are encouraged to further improve financial services, increase the support of long- and medium-term loans to the IC industry and software industry, actively innovate credit products suitable for the development of the IC industry and software industry, and increase the financial support for major projects under the premise of controllable risks and sustainable business; insurance funds shall be guided to carry out equity investment; bank financial companies, insurance, trusts and other non-bank financial institutions shall be supported in initiating the establishment of specialized asset management products.
14. We should vigorously support eligible IC enterprises and software enterprises to seek financing by listing on domestic and overseas market and accelerate the review process of listing in China. The R&D expenditure that meets the relevant conditions of accounting standards for business enterprises may be capitalized. Eligible enterprises are encouraged and supported to list on the Sci-Tech innovation board (STAR Market) or second board (ChiNext market) for financing and smooth the exit channels for original shareholders of the relevant enterprises. Through the capital market at different layers, we should provide equity financing, equity transfer and other services for IC enterprises and software enterprises at different development stages, expand direct financing channels, and increase the proportion of direct financing.
15. Eligible IC enterprises and software enterprises are encouraged to issue enterprise bonds, corporate bonds, short-term financing bonds and medium-term notes, etc., financing channels of enterprises shall be expanded, and enterprises shall be supported in raising funds from the bond market by means of medium-term and long-term bonds.
III. Research and Development (R&D) Policy
16. We should focus on the R&D of key core technologies of high-end chips, IC equipment and process technologies, key materials of ICs, IC design tools, basic software, industrial software and application software, and constantly explore and establish a new nationwide system for tackling key core technological breakthroughs under the socialist market economy conditions. The Ministry of Science and Technology, the National Development and Reform Commission, the Ministry of Industry and Information Technology and other authorities shall carry out proper organization and implementation of relevant work, and actively take advantage of national key R&D plans and national major special science and technology projects to provide support.
17. In fields such as advanced storage, advanced computing, advanced manufacturing, high-end packaging and testing, key equipment and materials, and a new generation of semiconductor technology, we should promote the construction of various innovation platforms in light of the characteristics of the industry. The Ministry of Science and Technology, the National Development and Reform Commission and the Ministry of Industry and Information Technology shall give priority to supporting the relevant innovation platforms to implement R&D projects.
18. Software enterprises are encouraged to implement the national standards for software quality, information security, development and management, etc. We should strengthen the development of standardization organization of ICs, improve standard system, strengthen standard verification and enhance R&D capability. We should also improve the quality of ICs and software and enhance industry competitiveness.
IV. Import & Export Policy
19. Where key IC design enterprises and software enterprises encouraged by the state need to temporarily import self-use equipment (including development and testing equipment), software and hardware environment, prototypes and parts and components within a certain period, they may go through customs formalities for temporarily imported goods if they comply with provisions and their import tax shall be governed by the existing regulations.
20. For software export contracts concluded between software enterprises and foreign enterprises with higher credit rating, financial institutions may provide financing and insurance support under the principles of independent loan examination and risk controllability.
21. It is imperative to promote the export of ICs, software and information technology services, vigorously develop international service outsourcing business, and encourage enterprises to establish overseas marketing networks. The Ministry of Commerce shall, in conjunction with relevant authorities, establish a long-term cooperation mechanism with key countries and regions, and take comprehensive measures to create conditions for enterprises to expand emerging markets.
V. Human Resource Policy
22. We should further strengthen the development of IC and software majors in colleges and universities, accelerate the setting of first-level disciplines of IC, timely adjust curriculum, teaching plans and teaching methods with close regard to the needs of industrial development, and strive to cultivate inter-disciplinary and practical high-level talent. We should also strengthen the development of teaching staff for IC and software majors, teaching laboratories and training bases. The Ministry of Education shall, jointly with the relevant authorities, strengthen supervision and guidance.
23. Qualified colleges and universities are encouraged to speed up the construction of exemplary microelectronics colleges by means of cooperation with IC enterprises. We should give priority to the development and cultivation of integrated enterprises of industry and education in the IC field. Pilot enterprises included in the scope of development and cultivation of enterprises with integration of industry and education may, if their investment in running vocational education conforms to relevant provisions, enjoy a 30% deduction of the investment amount from the educational surcharge and local educational surcharge payable in the current year. We should encourage the investment funds of relevant industries in the society to increase investment and support colleges and universities to jointly with enterprises carry out the development of special resource pool for IC talent cultivation. The exemplary microelectronics colleges and characteristic exemplary software colleges are supported to cooperate with internationally renowned universities and multinational corporations to bring in foreign teachers and quality resources and jointly train IC and software talent.
24. Local governments are encouraged to commend and award, in accordance with the relevant provisions of the State, high-end talent, as well as high-level engineers and R&D designers that have made outstanding contributions to the field of ICs and software and improve the equity incentive mechanism. We should, through relevant talent projects, increase efforts in introducing top experts and excellent talents and teams. Relevant policies on introduction of IC and software talent shall be explored in priority in industry cluster area or relevant industry clusters. We should formulate and implement the annual plan for introduction and training of IC and software talent and promote the development of international training bases for national IC and software talent, with focus on strengthening medium- and long-term training of urgently needed professionals.
25. The industry self-regulation shall be strengthened to guide reasonable and orderly flow of IC and software talent and avoid vicious competition.
VI. Intellectual Property Right (IPR) Policy
26. Enterprises are encouraged to register the exclusive right to IC layout design and software copyright. We should support IC enterprises and software enterprises to apply for intellectual property rights in accordance with the law and give related support to those meeting related provisions. Intellectual property services related to IC and software shall be developed vigorously.
27. We should strictly implement the IC and software IPR protection system and intensify punishments for IPR infringement and illegal acts. We should also strengthen the protection of proprietary rights to IC layout design and software copyright in network environment, actively develop and apply network copyright protection technology of copyrighted software and effectively protect intellectual property rights of IC and software.
28. It is required to explore the establishment of a long-term mechanism for software legalization. Software pre-installed in all computers sold within the territory of China (including mainframe computers, servers, minicomputers and laptops) must be copyrighted software, and no computer pre-installed with non-copyrighted software may be marketed. Policies and measures on use of copyrighted software by government agencies shall be fully implemented, government centralized procurement of general software shall be adopted, and management of software assets shall be strengthened. We should promote the institutionalization and standardization of the use of copyrighted software in important industries and key fields, strengthen the publicity and training, supervision and inspection of the use of copyrighted software, and create a good environment for the use of copyrighted software.
VII. Market Application Policy
29. We should, through policy guidance and led by market application, increase efforts in promoting IC and software innovative products so as to drive the continuous upgrading of technology and industry.
30. It is necessary to promote the cluster development of IC industry and software industry, support the construction of information technology service industry clusters and IC industry clusters, and support the characteristic and high-end development of software industry parks.
31. We should support the backbone enterprises, research institutes, colleges and universities as well as other innovation entities in the fields of IC and software to establish various specialized innovation service agencies represented by specialized maker spaces, optimize the allocation of technology, equipment, capital, market and other innovation resources and provide specialized services focusing on IC and software fields in accordance with the market mechanism so as to achieve integrated development of large, medium and small enterprises. The support for specialized service platforms such as specialized maker spaces, high-tech business incubators and university science and technology parks serving the IC and software industries to improve their specialized service capabilities.
32. Active efforts shall be made to guide the development of service outsourcing of information technology R&D and application business. Governmental departments are encouraged to entrust, by way of purchase of services, qualified software and information technology service agencies to undertake the services which fall under the scope of government duties in development of e-government, development of data centres and data processing and are suitable to be provided by market-oriented means. We should quickly formulate and perfect corresponding provisions on security review and confidentiality management and encourage large and medium-sized enterprises to rely on information technology R&D and application business organizations to establish specialized software and information technology service enterprises.
33. Consumer privacy and trade secret protection systems shall be improved under the network environment to promote the networking development of software and information technology services. Software products and services meeting safety requirements shall be promoted in government organs and public institutions at all levels.
34. Efforts shall be made to further regulate the market order of the IC industry and software industry, strengthen anti-monopoly law enforcement, crack down on various monopoly behaviors in accordance with the law, properly deal with anti-monopoly review of business operators, and maintain fair market competition in the IC industry and software industry. We should strengthen anti-unfair competition law enforcement and crack down on all kinds of unfair competition behaviors in accordance with the law.
35. It is imperative to give full play to the role of industry associations and standardization organizations, accelerate the development of standards relating to IC and software, and promote IC quality evaluation and software development cost metrics.
VIII. Policy on International Cooperation
36. We should deepen the global cooperation in the IC industry and software industry and actively create a favorable environment for international enterprises to invest and develop in China. We should also encourage domestic colleges and universities and research institutes to strengthen cooperation with overseas high-level universities and research institutes and encourage international enterprises to establish R&D centres in China. It is necessary to strengthen the communication and exchange between domestic industry associations and international industry organizations, support domestic enterprises in carrying out cooperation with international enterprises at home and abroad, and deeply participate in the division and cooperation in international markets and the formulation of international standards.
37. IC industry and software industry are encouraged to "go global". We should facilitate domestic enterprises to jointly establish R&D centres abroad and make better use of international innovation resources to enhance the industrial development level. The National Development and Reform Commission, the Ministry of Commerce and other relevant authorities shall improve the service level to create a favorable environment for enterprises to carry out investment and other cooperation.
IX. Supplementary Provisions
38. All eligible IC enterprises (including enterprises engaging in design, production, packaging, testing, equipment and materials) and software enterprises established within the territory of China, regardless of the nature of their ownership, are entitled to these Policies.
39. These Policies shall be interpreted by the National Development and Reform Commission in conjunction with the Ministry of Finance, the State Taxation Administration, the Ministry of Industry and Information Technology, the Ministry of Commerce and the General Administration of Customs etc.
40. These Policies shall come into force as of the date of promulgation. The policies clarified in Documents Guo Fa [2000] No.18 and Guo Fa [2011] No.4 shall continue to be implemented. In case of any inconsistency between the relevant policies and these Policies, the latter shall prevail.
