To support and promote the growth of high-tech enterprises in China, the Chinese government has established the “Administrative Measures for the Recognition of High-tech Enterprises”. According to these measures, high-tech enterprises are those resident companies registered in China (excluding Hong Kong, Macau, and Taiwan) that have been actively involved in research and development, and driving the transformation of technological innovation in state-supported high-tech fields for over a year. To qualify as a high-tech enterprise, the company must also have established independent intellectual property rights and must be engaged in production and business activities based on these achievements.
Recognition as a high-tech enterprise affirms an entity’s status as a knowledge-intensive and technology-driven economic player, and is the most prestigious national recognition for science and technology companies. While this recognition carries significant benefits for the enterprises, it is crucial to meet the corresponding conditions when applying for certification.
The Benefits of High-Tech Enterprise Status in China
To encourage more enterprises to carry out scientific and technological innovation and apply for the high-tech enterprise certification, China has implemented a series of incentive policies that provide significant benefits to these enterprises and enhance their competitiveness.
1. Preferential corporate income tax rates
The State Administration of Taxation issued an announcement stating that high-tech enterprises can enjoy preferential income tax policies. If an enterprise is successfully identified as a high-tech enterprise, its annual corporate income tax rate will be reduced from 25% to 15%, which is equivalent to a 40% reduction in the standard tax rate. After three years, the enterprise can apply for a review to continue enjoying tax incentives for another three years, subject to approval. Additionally, when combined with other deductions, companies can enjoy up to an 80% reduction in corporate income tax.
2. Scientific research funding support and financial allocation
High-tech enterprises can also enjoy relevant preferential policies for scientific research funding and financial support. Enterprises that are successfully identified as a high-tech enterprises can obtain capital subsidies of up to 2 million yuan in Shanghai. These subsidies are available to enterprises that hold a "High-tech Enterprise Certification Certificate" and related approval documents, making it easier for high-tech enterprises to access funding and financial support for research and development.
In addition to financial subsidies, being a high-tech recognised enterprise in China offers a range of benefits that can enhance the competitiveness of companies. These include the following:
1. National enterprise honour
High-tech enterprise recognition is a prestigious national qualification and carries significant influence, comparable to other esteemed national distinctions like China's renowned brand products, well-known trademarks, and nationally recognised inspection-free products. Attaining this honour can greatly benefit the enterprise by enhancing advertising efforts and improving the chances of winning product bidding projects. Additionally, the High-tech enterprise status can alleviate the company's brand status, providing a significant boost to its reputation.
2. Talent attraction
Obtaining the status of a high-tech enterprise is highly attractive to talented individuals and serves as an important factor in their selection of an employer. Moreover, high-tech enterprises can take advantage of talent introduction and settlement policies in China’s first-tier cities. For instance, in Shanghai, high-tech enterprises' employees are eligible to settle in the city with just one year of work experience under the ‘Talent Introduction and Settlement Rules’. This policy enhances the attractiveness of high-tech enterprises to talented individuals and facilitates the recruitment and retention of technology professionals.
3. Enhanced measurement dimensions for listing and financing
Recognition as a high-tech enterprise can increase a company’s score during the listing process on the National Equities Exchange and Quotations, as well as enhance its valuation during the financing process. This recognition serves as a vital measurement factor for potential investors or partners to consider.
High-Tech Enterprise Identification in China: What Companies Need to Know
According to the Notice of the Ministry of Science and Technology, the Ministry of Finance and the State Administration of Taxation on Revising and Distributing the Administrative Measures for the Recognition of High-tech Enterprises, the following conditions must be met:
1. Incorporation date
The enterprise must be registered for more than one year before applying for the certification.
2. Intellectual property ownership
The enterprise shall obtain the ownership of intellectual property rights that play a core supporting role in the technology of their main products or services through independent research, transfer, donation, mergers and acquisitions.
3. Core technology
The technology that plays a core supporting role in the enterprise’s main products or services must fall within the scope of the High-tech Fields supported by the State.
4. Scientific and technical personnel
The proportion of scientific and technological personnel engaged in R&D and related technological innovation activities in the enterprise shall not be less than 10% of the total number of employees of the enterprise in that year.
5. R&D expenses
The proportion of total R&D expenses of an enterprise in the past three fiscal years (calculated according to the actual operating time if the actual operating period is less than three years) shall meet the following requirements:
| Annual sales revenue |
Proportion of R&D expenses |
| R&D expenses as a percentage of annual sales revenue |
R&D expenses in China account for total R&D expenses |
| <50 million yuan |
Not less than 5% |
Not less than 60% |
| 50 million- 200 million yuan |
Not less than 4% |
| >200 million yuan |
Not less than 3% |
6. Revenue from high-tech products or services
The enterprise’s proportion of revenue from high-tech products or services should constitute at least 60% of the total revenue in the past one year, and at least 50% of the revenue from high-tech products or services should be derived from Category I IP.
7. Innovation
The enterprise should demonstrate a strong capability for independent innovation, which is evaluated according to relevant criteria.
8. Compliance
The enterprise must not have any major safety accidents, major quality accidents, or serious environmental violations within one year prior to the certification application.
China Updates
Accounting and Taxation
- Imported exhibits sold during the exhibition period of the Canton Fair in 2023 within the duty-free quota will be exempted from import tariff, import-linked VAT, and consumption tax. However, the tax benefits will not apply to goods that are prohibited for import by the state, including endangered animals and plants and their products, tobacco, wine, automobiles and goods included in the "Import of major technical equipment and product catalogs that are not tax-free".
- As of January 1, 2023, in accordance with tax regulation [2023] No. 7 issued by the Ministry of Finance and STA, enterprises engaged in R&D activities that have not generated intangible assets or included them in current profits and losses, are eligible for a weighted pre-tax deduction, allowing 100% of the actual R&D expenses incurred. For R&D expenses that have formed intangible assets, pre-tax amortisation based on 200% of the costs of the intangible assets is allowed as of the same date.
Human Resources
- In January 2018, the General Office of the Shanghai Municipal Government forwarded the ‘Opinions on the Implementation of Migrant Workers’ Children in Shanghai Studying in Schools of All Levels and Types’ from the Shanghai Municipal Education Commission and four other departments.
On January 1, 2023, the Shanghai Municipal People's Government issued a notice extending the validity period of the above policy until December 31, 2027.
• On March 26, 2023, the Ministry of Finance issued an announcement to extend the preferential policy on employment security funds for the disabled.
The policy of reducing employment security payments for the disabled based on different employment classifications will continue to be implemented.
- If the proportion of disabled persons employed by employers is 1% or more but less than the proportion prescribed by the people's government of the province, autonomous regional, or directly governed municipality under the Central Government, 50% of the required amount should be paid as employment security fund for the disabled; and
- If the proportion of disabled persons employed by an employer is less than 1%, 90% of the required amount should be paid as employment security fund for the disabled.
Enterprises with less than 30 employees shall continue to be exempt from employment security payments for the disabled.
Corporate Governance
- On April 4, 2023, the Shanghai Municipal People's Government released two important policies: the "Several Measures of Shanghai Municipality to Attract and Use More Foreign Investment" and the "Several Policy Measures of Shanghai Municipality to Promote Foreign Trade Stabilisation and Quality Improvement." Both policies will come into effect on April 6, 2023.
Among these policies, the "Several Measures of Shanghai Municipality to Attract and Use More Foreign Investment" introduce 20 measures aimed at enhancing financial and tax support for foreign investment projects. It includes the implementation of a policy to temporarily exempt income tax withholding for foreign investors' direct investments using distributed profits. The policies also aim to streamline processes, making preferential policies more accessible to foreign-invested enterprises.
