Interpretation of the Policy on Corporate Income Tax Reduction and Exemption for Technology Transfer Income

Policy Subjects

Resident enterprises engaging in technology transfer.

Policy Contents

For a tax year, the portion of technology transfer income earned by resident enterprises that does not exceed 5 million yuan will be exempt from corporate income tax. The portion exceeding 5 million yuan will have the corporate income tax reduced by half.

Application Conditions

1. The technology transfer entities eligible for the tax benefits must be resident enterprises as defined by the Enterprise Income Tax Law.
2. The scope of technology transfer includes patents (including national defense patents), computer software copyrights, integrated circuit layout design rights, plant variety rights, bio-medicine variety rights, and other technologies specified by the Ministry of Finance and the State Taxation Administration. Patents refer to inventions, utility models, and non-simple changes to product designs and shapes that are granted exclusive rights by law.
3. Technology transfer refers to the transfer of ownership of the aforementioned technologies by a resident enterprise with exclusive global licensing rights for at least 5 years.

Since October 1, 2015, technology transfer income derived from non-exclusive licensing rights for over 5 years, obtained by resident enterprises nationwide, falls within the scope of enjoying preferential treatment in terms of corporate income tax.

For technology that meets the conditions of non-exclusive licensing rights for over 5 years, only the technology owned by the enterprise can be considered. The ownership of technology is determined by the administrative department of the State Council. Patents are determined by the National Intellectual Property Administration, defense patents by the Ministry of National Defense, computer software copyrights by the National Copyright Administration, integrated circuit layout design rights by the National Intellectual Property Administration, plant variety rights by the Ministry of Agriculture, and bio-medicine variety rights by the National Medical Products Administration.

4. A technology transfer contract should be signed. For domestic technology transfers, registration and certification are required by the provincial-level or higher (including provincial-level) departments of science and technology. Cross-border technology transfers need to be certified and registered by the provincial-level or higher (including provincial-level) departments of commerce. Technology transfers that involve financial support require approval from the provincial-level or higher (including provincial-level) departments of science and technology.

5. Technology transfer income obtained from related parties where the sum of direct and indirect equity ownership reaches 100% will not enjoy the tax reduction and exemption policy for technology transfer.

6. Enterprises enjoying the tax benefits for technology transfer income should calculate the income separately and reasonably allocate the enterprise's period expenses. Failure to calculate the income separately will result in disqualification for the tax benefits.

Policy Basis

1. Article 27, Item 4 of the Enterprise Income Tax Law of the People's Republic of China.
2. Article 90 of the Implementation Regulations of the Enterprise Income Tax Law of the People's Republic of China.
3. Circular (CaiShui [2010] No. 111) on Corporate Income Tax Policies Concerning the Technology Transfer of Resident Enterprises issued by the Ministry of Finance and the State Taxation Administration.
4. Circular (CaiShui [2015] No. 116) on Nationwide Implementation of Tax Pilot Policies Related to National Independent Innovation Demonstration Zones issued by the Ministry of Finance and the State Taxation Administration.
5. Circular (GuoShuiHan [2009] No. 212) on Corporate Income Tax Issues Concerning Technology Transfer Income issued by the State Taxation Administration.
6. Announcement (GuoShuiZongGongGao [2013] No. 62) on Corporate Income Tax Issues Concerning Technology Transfer Income Reduction and Exemption issued by the State Taxation Administration.
7. Announcement (GuoShuiZongGongGao [2015] No. 82) on Corporate Income Tax Issues Concerning Income from Licensing Right Technology Transfer issued by the State Taxation Administration.