State Council Issues the Several Policies for Promoting the High-quality Development of the Integrated Circuit Industry and Software Industry in the New Era

Recently, to further optimize the development environment for the integrated circuit and software industries, deepen international cooperation, and enhance innovation capabilities and development quality, the State Council has issued Several Policies for Promoting the High-quality Development of the Integrated Circuit Industry and Software Industry in the New Era (hereinafter referred to as "Several Policies") to the people's governments of all provinces, autonomous regions, and municipalities directly under the Central Government, as well as to all ministries and directly affiliated institutions of the State Council. The scope of these policy measures covers eight areas: taxation and finance, investment and financing, research and development, import and export, talent, intellectual property, market application, and international cooperation.

The Several Policies emphasize that the integrated circuit industry and software industry are the core of the information industry and key forces leading a new round of technological revolution and industrial transformation. Since the promulgation of the Several Policies for Encouraging the Development of Software and Integrated Circuit Industries and the Several Policies for Further Encouraging the Development of Software and Integrated Circuit Industries by the State Council, China's integrated circuit and software industries have experienced rapid development, strongly supporting the national informatization construction and promoting the sustainable and sound development of the national economy and society.

The Several Policies state that, to further optimize the development environment for the integrated circuit and software industries, deepen international cooperation in these industries, and enhance the innovation capabilities and development quality of these industries, a set of policy measures in eight key areas are formulated and introduced: taxation and finance, investment and financing, research and development, import and export, talent development, intellectual property rights, market application, and international cooperation. To further innovate systems and mechanisms, encourage the development of the integrated circuit and software industries, and vigorously nurture enterprises in the fields of integrated circuits and software; strengthen the construction of specialized programs in integrated circuits and software, accelerate the establishment of a first-level discipline for integrated circuits, and support the integration of industry and education; strictly enforce the intellectual property rights (IPR) protection system and intensify the punishment for IPR infringements in the integrated circuit and software industries; promote the clustered development of the industries, regulate market order in the industries, and actively engage in international cooperation.

The Several Policies clearly state that all integrated circuit and software enterprises established within China, regardless of their ownership structure, are eligible to enjoy the relevant policies as stipulated. Furthermore, the government encourages and promotes global cooperation in the integrated circuit and software industries, and actively creates a market-oriented, rule-of-law-based, and international business environment for various market entities to invest and thrive in China.

The Several Policies require that all departments and local governments swiftly formulate specific supporting policies, accelerate the implementation of these policies, and ensure their effectiveness in promoting the high-quality development of China's integrated circuit and software industries.

The integrated circuit industry and software industry are the core of the information industry and key forces leading a new round of technological revolution and industrial transformation. Since the issuance of the Notice of the State Council on Issuing Several Policies for Encouraging the Development of the Software and Integrated Circuit Industries (State Council Document [2000] No. 18) and the Notice of the State Council on Issuing Several Policies for Further Encouraging the Development of the Software and Integrated Circuit Industries (Guo Fa [2011] No. 4) by the State Council, China's integrated circuit and software industries have experienced rapid development, strongly supporting the national informatization construction and promoting the sustainable and sound development of the national economy and society. To further optimize the development environment for the integrated circuit and software industries, deepen international cooperation in these industries, and enhance the innovation capabilities and development quality of these industries, the following policies are formulated.

 

I. Fiscal and Tax Policy

(I) Integrated circuit production enterprises or projects encouraged by the state with an integrated circuit line width of less than 28 nanometers (inclusive) and an operating period of more than 15 years are exempt from corporate income tax from the first to the tenth year. Integrated circuit production enterprises or projects encouraged by the state with an integrated circuit line width of less than 65 nanometers (inclusive) and an operating period of more than 15 years are exempted from corporate income tax from the first to the fifth year and are subject to a corporate income tax at half the statutory rate of 25% from the sixth to the tenth year. Integrated circuit production enterprises or projects encouraged by the state with an integrated circuit line width of less than 130 nanometers (inclusive) and an operating period exceeding 10 years are exempt from corporate income tax from the first to the second year and are subject to a corporate income tax at half the statutory rate of 25% from the third to the fifth year. For integrated circuit production enterprises encouraged by the state with a line width of less than 130 nanometers (inclusive), any losses incurred during the tax year are allowed to be carried forward to offset profits in subsequent years, and the maximum period for such carry-forward shall not exceed 10 years.

For integrated circuit production enterprises enjoying tax preferential policies, the preferential period is calculated from the first profit-making year. For integrated circuit production projects enjoying tax preferential policies, the preferential period is calculated from the tax year in which the first operational income is obtained. The list of integrated circuit production enterprises or projects encouraged by the state is formulated by the National Development and Reform Commission and the Ministry of Industry and Information Technology, in conjunction with relevant departments.

(II) Integrated circuit design, equipment, materials, packaging, and testing enterprises as well as software enterprises encouraged by the state are exempt from corporate income tax for the first two years starting from the first profit-making year, and from the third to the fifth year, they are subject to a corporate income tax at half the statutory rate of 25%. The criteria for integrated circuit design, equipment, materials, packaging, and testing enterprises encouraged by the state are formulated by the Ministry of Industry and Information Technology in conjunction with relevant departments.

(III) Key integrated circuit design enterprises and software enterprises encouraged by the state are exempt from corporate income tax for the first five years starting from the first profit-making year, and in subsequent years, they are subject to a reduced corporate income tax rate of 10%. The list of key integrated circuit design enterprises and software enterprises encouraged by the state is formulated by the National Development and Reform Commission and the Ministry of Industry and Information Technology, in conjunction with relevant departments.

(IV) The conditions and scope of the corporate income tax preferential policies for integrated circuit enterprises or projects and software enterprises, as implemented by the state, will be dynamically adjusted based on technological advancements in these industries. For integrated circuit design enterprises and software enterprises, the corporate income tax for years prior to the implementation of this policy shall be implemented in accordance with the “two exemptions and three halves” preferential policy as specified in the State Council Document [2011] No.4 Document.

(V) The value-added tax (VAT) preferential policies for integrated circuit enterprises and software enterprises will continue to be implemented.

(VI) Within a specified period, logic circuit and memory production enterprises with an integrated circuit line width of less than 65 nanometers (inclusive), as well as specialty process integrated circuit production enterprises with a line width of less than 0.25 micrometers (inclusive) (including those producing photomasks and silicon wafers of 8 inches or larger) are exempt from import tariffs on production raw materials, consumables, special building materials for clean rooms, supporting systems, and spare parts for integrated circuit production equipment, which are imported for their own use. Additionally, compound semiconductor integrated circuit enterprises and advanced packaging and testing enterprises with a line width of less than 0.5 micrometers (inclusive) will also be exempt from import tariffs on production materials and consumables that are imported for their use. Specific policies are formulated by the Ministry of Finance in conjunction with the General Administration of Customs and other relevant departments. The lists of such enterprises and such duty-free goods are formulated by the National Development and Reform Commission and the Ministry of Industry and Information Technology in conjunction with other relevant departments.

(VII) Within a specified period, key integrated circuit design enterprises and software enterprises encouraged by the state, as well as the integrated circuit production enterprises and advanced packaging and testing enterprises mentioned in Article (VI), will be exempt from import tariffs on equipment imported for their own use, and technologies (including software) and accompanying components and spare parts imported along with the equipment according to contracts, except for items listed in the catalog of goods not eligible for tax exemption. Specific policies are formulated by the Ministry of Finance in conjunction with the General Administration of Customs and other relevant departments.

(VIII) Within a specified period, the value-added tax (VAT) on the import of new equipment for key integrated circuit (IC) projects may be paid in installments. Specific policies are formulated by the Ministry of Finance in conjunction with the General Administration of Customs and other relevant departments.

 

II. Investment and Financing Policy

(IX) Strengthen services and guidance for major integrated circuit (IC) projects, orderly guide and regulate the development order of the IC industry, ensure proper planning and layout, reinforce risk warnings, and avoid low-level repetitive construction.

(X) Encourage and support integrated circuit enterprises and software enterprises to strengthen resource integration. For corporate restructuring and mergers and acquisitions conducted according to market principles, relevant departments of the State Council and local governments should actively support and guide these activities and must not impose any form of restrictive conditions beyond those stipulated by laws, regulations, and policies.

(XI) Fully utilize existing government investment funds at both national and local levels to support the development of the integrated circuit industry and software industry. Encourage social capital to raise funds through multiple channels according to market principles, establish investment funds, and enhance the market-oriented level of these funds.

(XII) Encourage local governments to establish loan risk compensation mechanisms to support integrated circuit enterprises and software enterprises in obtaining commercial loans through means such as intellectual property rights pledge financing, equity pledge financing, accounts receivable pledge financing, supply chain finance, and technology and intellectual property insurance. Fully leverage the role of financing guarantee institutions to actively provide various forms of financing guarantee services to small and micro enterprises in the integrated circuit and software sectors.

(XIII) Encourage commercial financial institutions to further improve financial services, increase medium- and long-term loan support for the integrated circuit (IC) industry and software industry, actively develop credit products suitable for the development of these industries, and provide greater financial support to major projects under the premise of controllable risks and sustainable commercial operations. Direct insurance funds towards equity investments.; support bank wealth management companies, insurance companies, trusts, and other non-bank financial institutions in launching specialized asset management products.

(XIV) Provide strong support for eligible integrated circuit (IC) enterprises and software enterprises to raise capital through listing on domestic and international stock markets. Accelerate the domestic listing review process, and allow research and development (R&D) expenditures that meet the conditions stipulated by enterprise accounting standards to be treated as capitalized expenses. Encourage and support eligible enterprises to raise capital through listing on the STAR Market and the Growth Enterprise Market (GEM), and ensure smooth exit channels for original shareholders of these enterprises. Offer equity financing and share transfer services to integrated circuit (IC) enterprises and software enterprises at different stages of development through various levels of capital markets. Expand channels for direct financing and increase the proportion of direct financing.

(XV) Encourage eligible integrated circuit (IC) enterprises and software enterprises to issue corporate bonds, company bonds, short-term financing bills, and medium-term notes. Broaden corporate financing channels and support enterprises in raising funds from the bond market through medium- and long-term bonds.

 

III. R&D Policy

(XVI) Focusing on the research and development of core technologies in key fields such as high-end chips, integrated circuit equipment and process technology, key materials for integrated circuits, integrated circuit design tools, basic software, industrial software, and application software, continuously explore the construction of a new system for mobilizing the resources nationwide to achieve breakthroughs in core technologies in key fields in the context of the socialist market economy. The Ministry of Science and Technology, the National Development and Reform Commission, the Ministry of Industry and Information Technology, and other relevant departments are responsible for the organization and implementation of relevant work, and they shall actively provide support by leveraging national key research and development programs, major national science and technology projects, and other such initiatives.

(XVII) In the fields of advanced storage, advanced computing, advanced manufacturing, high-end packaging and testing, key equipment and materials, and next-generation semiconductor technologies, promote the construction of various innovation platforms in combination with industry characteristics. The Ministry of Science and Technology, the National Development and Reform Commission, the Ministry of Industry and Information Technology, and other relevant departments will give priority support to relevant innovation platforms in implementing research and development projects.

(XVIII) Encourage software enterprises to execute national standards concerning software quality, information security, development management, etc. Strengthen the building of standardization organizations for integrated circuits, improve the standard system, enhance standard validation, and boost research and development capabilities. Enhance the quality of integrated circuits and software to strengthen industry competitiveness.

 

IV. Import and Export Policy

(XIX) Within a certain period, for key integrated circuit design enterprises and software enterprises encouraged by the state, any equipment (including development and testing equipment) for self use, software and hardware environments, prototypes and assemblies, and components that need to be temporarily imported and comply with regulations can undergo temporary entry goods customs procedures. Their import taxation shall be implemented according to current regulations.

(XX) For software export contracts signed between software enterprises and foreign enterprises with high credit ratings, financial institutions may provide financing and insurance support in accordance with the principles of independent loan review and risk control.

(XXI) Promote the export of integrated circuits, software, and information technology services, vigorously develop international service outsourcing business, and support enterprises in establishing overseas marketing networks. The Ministry of Commerce, in conjunction with relevant departments, will establish long-term cooperation mechanisms with key countries and regions and will adopt comprehensive measures to create conditions for enterprises to expand into emerging markets.

 

V. Talent Policy

(XXII) Further strengthen the construction of integrated circuit and software majors in higher education institutions, accelerate the establishment of integrated circuits as a first-level discipline, and promptly adjust course arrangement, teaching programs, and teaching approaches by closely aligning with industrial development demands to vigorously cultivate high-caliber, versatile, and practical talents. More efforts will be made to the construction of faculty teams, teaching laboratories, and internship/training bases for integrated circuit and software majors. The Ministry of Education, together with relevant departments, will strengthen supervision and guidance.

(XXIII) Encourage universities that have the necessary resources and capabilities to collaborate with integrated circuit enterprises to accelerate the construction of exemplary microelectronics colleges. The development and cultivation of industry-education integration enterprises in the integrated circuit sector should be prioritized. Pilot enterprises included in the scope of construction and cultivation of industry-education integration enterprises, if their investments in vocational education meet the specified criteria, may offset 30% of the investment amount against the education surcharge and local education surcharge payable by the enterprise for that year. Encourage social and industrial investment funds to increase their investments, supporting universities in collaboration with enterprises to develop specialized resource libraries for integrated circuit talent cultivation. Support exemplary microelectronics colleges and distinctive software colleges in partnering with internationally renowned universities and multinational companies to introduce foreign teachers and high-quality resources, aiming to jointly cultivate talent in integrated circuits and software.

(XXIV) Encourage local authorities to commend and reward, in accordance with national regulations, high-end talents who have made outstanding contributions in the fields of integrated circuits and software, as well as high-level engineers and R&D design personnel, and improve equity incentive mechanisms. Introduce top experts, outstanding talents, and their teams with greater intensity through relevant talent programs. Prioritize the exploration of policies for introducing integrated circuit and software talents in industrial clusters or related cluster areas. Develop and implement an annual plan for the introduction and training of integrated circuit and software talents, and promote the construction of national international training bases for integrated circuit and software talents with a focus on medium- to long-term training for urgently needed and scarce professional talents.

(XXV) Strengthen industry self-regulation to guide the rational and orderly mobility of talents in the integrated circuit and software sectors and prevent malicious competition.

 

VI. Intellectual Property Policy

(XXVI) Encourage enterprises to register integrated circuit layout-design rights and software copyrights. Support integrated circuit and software enterprises in legally applying for intellectual property rights, and provide relevant support to those that meet the specified criteria. Promote the vigorous development of intellectual property services related to integrated circuits and software.

(XXVII) Strictly implement the intellectual property protection system for integrated circuits and software, and increase the punishment for intellectual property infringement and illegal activities. Enhance the protection of integrated circuit layout-design rights and software copyrights in networked environments. Actively develop and apply technologies for protecting legitimate software copyright online, to effectively safeguard intellectual property rights in integrated circuits and software.

(XXVIII) Explore the establishment of a long-term mechanism for promotion of genuine software. All computers (including mainframes, servers, microcomputers, and laptops) sold within China must be pre-installed with genuine software; the sale of computers pre-installed with unlicensed software is prohibited. Fully implement the policy measures for government agencies to use genuine and legitimate software, enforce centralized government procurement for general-purpose software, and strengthen the management of software assets. Promote the institutionalization and standardization of using genuine software in important industries and key fields. Enhance publicity, training, and supervision inspections related to the use of genuine and legitimate software, to foster a good environment for the use of genuine and legitimate software.

 

VII. Market Application Policy

(XXIX) Through policy guidance and driven by market applications, intensify the promotion of innovative integrated circuit and software products, thereby driving continuous technological and industrial upgrades.

(XXX) Promote the clustered development of the integrated circuit industry and software industry, support the construction of information technology service clusters and integrated circuit industry clusters, and support the specialized and high-end development of software park areas.

(XXXI) Support key enterprises, research institutes, universities, and other innovative entities in the fields of integrated circuits and software in building various specialized innovation service institutions, represented by professional maker spaces. Optimize the allocation of innovation resources such as technology, equipment, capital, and market access, and provide specialized services focused on the integrated circuits and software sectors according to market mechanisms, to facilitate integrated development among large, medium, and small enterprises. Increase support for specialized maker spaces, technology business incubators, university science parks, and other specialized service platforms that serve the integrated circuit and software industries, to enhance their specialized service capabilities.

(XXXII) Actively guide the development of service outsourcing for information technology R&D and application business. Encourage government departments to adopt a service procurement approach, entrusting tasks related to electronic government construction, data center construction, and data processing to eligible software and information technology service providers. These tasks should be within the scope of government responsibilities and appropriate for provision through market mechanisms. Urgently formulate and improve corresponding security review and confidentiality management regulations. Encourage large and medium-sized enterprises to establish specialized software and information technology service companies based on their information technology research and application business units.

(XXXIII) Improve the system for protecting consumer privacy and commercial secrets in network environments and promote the networked development of software and information technology services. Promote software products and services that meet security requirements in government agencies and public institutions at all levels.

(XXXIV) Further regulate the market order in the integrated circuit and software industries. Strengthen anti-monopoly enforcement to legally combat all forms of monopolistic behavior, and conduct antitrust reviews of business operators, to ensure fair competition in these industries. Enhance enforcement against unfair competition practices and legally fight against all types of improper competitive behaviors.

(XXXV) Fully leverage the role of industry associations and standardization institutions to accelerate the development of standards related to integrated circuits and software. Promote the norms for quality evaluation of integrated circuits and cost measurement of software development.

 

VIII. International Cooperation Policy

(XXXVI) Deepen global cooperation in the integrated circuit and software industries, and actively create a favorable environment for international enterprises to invest and develop in China. Encourage domestic universities and research institutes to strengthen cooperation with overseas high-level universities and research institutions, and encourage international enterprises to establish research and development centers in China. Enhance communication and exchange between domestic industry associations and international industry organizations, support domestic enterprises in conducting cooperation with international enterprises both domestically and overseas, and deeply participate in international market division of labor and the formulation of international standards.

(XXXVII) Promote the "going out" of the integrated circuit and software industries. Facilitate the joint establishment of research and development centers by domestic enterprises abroad, better utilizing international innovation resources to enhance the level of industrial development. The National Development and Reform Commission, the Ministry of Commerce, and other relevant departments will enhance service levels to foster a conducive environment for enterprises to engage in investments and other forms of cooperation.

 

IX. Supplementary Provisions

(XXXVIII) All eligible integrated circuit enterprises (including design, production, packaging, testing, equipment, and material enterprises) and software enterprises established within China, regardless of their ownership structure, are eligible to enjoy the policies outlined herein.

(XXXIX) The Several Policies shall be interpreted by the National Development and Reform Commission in conjunction with the Ministry of Finance, the State Administration of Taxation, the Ministry of Industry and Information Technology, the Ministry of Commerce, the General Administration of Customs, and other relevant departments.

(XL) The Several Policies shall enter into force from the date of issuance. The policies specified in State Council Document [2000] No. 18 and State Council Document [2011] No. 4 will continue to be implemented. In cases where the above policies conflict with the Several Policies, the provisions of the Several Policies shall prevail.

 

(Source: Xinhua News Agency, the website of the Central People's Government of the PRC)