In the News: Tax Incentives for IC Companies; Corruption Probe for Ex-CSRC Boss; and Scrutiny for Private Equity Funds

May 26, 2019 | BY

Marilyn Romero

New tax incentives are issued for Chinese software and integrated circuitry companies, as international companies withdraw from Huawei's supply chain under U.S. pressure; former head of the CSRC, Liu Shiyu, is facing a likely corruption investigation; and China's private equity sector comes under CSRC scrutiny, with warnings issued to several firms.

Huawei

Integrated circuitry, software firms get more tax incentives

The Ministry of Finance and State Taxation Administration announced recently that the country's integrated circuit design and software enterprises will get more tax incentives under a new policy. In a statement, the ministry said qualified IC and software companies will benefit from income tax exemption in the first and second profit-making years. From third to the fifth years, the companies that meet certain requirements will be allowed a 50% reduction in income tax until expiry of the preferential period. The period will start from the first profit-making year prior to December 31, 2018, the ministry said. The Ministry of Finance and the State Taxation Administration first released tax preferential measures to develop the country's IC and software industries in 2012. Four governmental departments followed with their tax preferential measures in 2016, according to an ECNS report.

The move to encourage local development of circuitry and software follows the U.S. administration's addition of China's flagship telecom company Huawei to the U.S. Department of Commerce's Bureau of Industry and Security's Entity List on May 15, effectively cutting it off from U.S. information technology manufacturers. Huawei is reliant on sourcing components and software from overseas manufacturers for some of its products. So far, Intel, Qualcomm, Xilinx, Broadcom, Amazon and Google, the latter of which provides the Android operating system, are among the companies that have reportedly said they can no longer supply Huawei.

More from CLP: Circular on Enterprise Income Tax Policy Issues Relevant to Integrated Circuit Production Enterprises; Announcement on Issues Relevant to Expanding the Scope of Enterprises to Which the Measures for Administration of the Exemption, Setoff and Refund of Tax Apply; State Council, Several Policies for Further Encouraging the Development of the Software Industry and Integrated Circuit Industry

 

Former CSRC chief Liu Shiyu put under corruption investigation

Liu Shiyu, the former head of the China Securities Regulatory Commission, or CSRC, has been placed under investigation for suspected law violations, a phrase often used in corruption probes in China. China's anti-corruption agency, the Central Commission for Discipline Inspection, said Liu has turned himself in and was cooperating with the investigation. Liu was chairman of the CSRC for three years before being replaced in January by Yi Huiman. He is still a senior Communist Party official. Currently, he heads the All-China Federation of Supply and Marketing Cooperatives, a Soviet-era holdover from China's centrally planned economy that operates a network of 30,000 agricultural collectives. During his tenure as CSRC head between February 2016 and January 2019, Liu was best known for his iron hand in cracking down on “capital market crocodiles” that preyed on small investors.

More from CLP: Safe Landings: Navigating the Chinese Securities Market; The rise of securities litigation in China; Measures for the Administration of Material Asset Restructurings by Listed Companies (Revised)

Regulator issues warnings to private equity firms

The China Securities Regulatory Commission, or CSRC, is stepping up its oversight of the country's $1.9 trillion private equity industry; and has issued warnings and corrective orders to several PE firms. According to a Caixin report, the CSRC found that more than 30% of PE firms in multiple provinces were in violation of laws and regulations. The warnings and orders are part of a sweeping new round of inspections of the country's PE industry that started earlier this year. As of the end of March this year, there were 24,361 private equity fund managers registered with the Asset Management Association of China, down 19 from the previous month. Assets at end of March managed by these funds reached Rmb12.79 trillion, up Rmb21 billion from in February. According to the report, among those issued corrective orders are Hengqin Ping An Real Estate Equity Investment Management Co; Hengqin Runhong Investment Management Co; and Huizhou Timesbole Private Equity Investment Management Co.

More from CLP: Zhuhai City, Tentative Measures for the Administration of the Pilot Foreign-invested Equity Investment Enterprise Project; Taking China's Asset Management to the Next Level; The Innovative Wave of Private Equity and Venture Capital in China

This premium content is reserved for
China Law & Practice Subscribers.

  • A database of over 3,000 essential documents including key PRC legislation translated into English
  • A choice of newsletters to alert you to changes affecting your business including sector specific updates
  • Premium access to the mobile optimized site for timely analysis that guides you through China's ever-changing business environment
For enterprise-wide or corporate enquiries, please contact our experienced Sales Professionals at +44 (0)203 868 7546 or [email protected]