A tougher road ahead

In order to foster the growth of technology companies and encourage investment in research and development, the PRC Enterprise Income Tax Law (中华人民共和国企业所得税法) provides income tax preferences for companies that are qualified as High and New Technology Enterprises (HNTEs) by reducing the tax rate to 15% from the standard 25%. Requirements for becoming an HNTE are set forth in two pronouncements: the Measures for the Administration of the Recognition of Hi-tech Enterprises (高新技术企业认定管理办法) (Administrative Measures), and the Guidelines for the Administration of High and New Technology Enterprise Certification (高新技术企业认定管理工作指引) (Guidelines). Both were issued jointly by the Ministry of Science and Technology, the Ministry of Finance and the State Administration of Taxation in 2008. Recently, companies applying to be certified as HNTEs have found that certification authorities are taking a toughened stance in their reviews.