Policy Subjects

Venture capital enterprises.

Policy Content

If a venture capital enterprise invests in unlisted small and medium-sized high-tech enterprises for a period of 2 years (24 months) or more through equity investment, it can deduct 70% of the investment amount from its taxable income in the year when the equity is held for a full 2 years. If the deduction is not fully utilized in the current year, it can be carried forward and deducted in subsequent tax years.

Application Conditions

1. The venture capital enterprise must invest in unlisted small and medium-sized high-tech enterprises for a period of 2 years (24 months) or more through equity investment.
2. A venture capital enterprise refers to an enterprise or other economic organization established within the territory of the People's Republic of China in accordance with the "Interim Measures for the Administration of Venture Capital Enterprises" (Order No. 39 of 2005 by the National Development and Reform Commission and other 10 ministries and commissions) and the "Provisions on the Administration of Foreign-Invested Venture Capital Enterprises" (Order No. 2 of 2003 by the Ministry of Commerce, the Ministry of Science and Technology, the State Administration for Industry and Commerce, the State Administration of Taxation, and the State Administration of Foreign Exchange, amended in accordance with the "Decision of the Ministry of Commerce on Amending Some Regulations and Normative Documents" (Order No. 2 of 2015 by the Ministry of Commerce)), specializing in venture capital activities.
3. The business scope of the venture capital enterprise must comply with the provisions of the "Interim Measures" and be registered as a professional legal person venture capital enterprise, such as "Venture Capital Limited Liability Company" or "Venture Capital Joint Stock Limited Company."
4. The venture capital enterprise must complete the filing in accordance with the conditions and procedures stipulated in the "Interim Measures," and pass the annual inspection and verification conducted by the filing management department to ensure that the investment operations comply with the relevant provisions of the "Interim Measures."
5. The small and medium-sized high-tech enterprises invested by the venture capital enterprise must meet the criteria specified in the "Notice of the Ministry of Science and Technology, Ministry of Finance, and State Administration of Taxation on the Revision and Issuance of the Management Measures for the Recognition of High-Tech Enterprises" (Guo Ke Fa Huo [2016] No. 32) and the "Notice of the Ministry of Science and Technology on the Revision and Issuance of the Guidelines for the Management of High-Tech Enterprise Recognition" (Guo Ke Fa Huo [2016] No. 195). Additionally, the number of employees should not exceed 500, the annual sales revenue should not exceed CNY 200 million, and the total assets should not exceed CNY 200 million.
6. Other conditions specified by the Ministry of Finance and the State Administration of Taxation.

Policy Basis

1. Article 31 of the Enterprise Income Tax Law of the People's Republic of China.
2. Article 97 of the Implementing Regulations of the Enterprise Income Tax Law of the People's Republic of China.
3. "Notice of the State Administration of Taxation on the Implementation of Preferential Enterprise Income Tax Policies for Venture Capital Enterprises" (SAT Announcement [2009] No. 87).