Incentives for high and new-technology enterprise in China

The Chinese government continues to introduce a series of preferential benefits to encourage businesses to declare themselves as a high and new-technology enterprise (HNTE), fostering innovation and research and development (R&D). While the recognition comes with substantial advantages for these enterprises, it is crucial to meet the corresponding conditions when applying for certification. Additionally, there are some considerations to keep in mind after acquiring the HNTE title.

What are the benefits of being a high and new-technology enterprise?

1. Tax incentives

One of the most enticing benefits for HNTEs is the preferential corporate income tax (CIT) rate of 15%, which is 10% lower than the standard CIT rate. This reduction offers a competitive edge, allowing qualified enterprises to allocate more resources to innovation and development. Moreover, these enterprises can carry forward potential losses for up to ten years before certification, giving them an extra five-year advantage compared to regular enterprises. This extended window enhances their financial flexibility and reinforces their commitment to long-term growth and progress.

2. National enterprise honour

Achieving HNTE status is not just a certification; it is a prestigious national recognition comparable to other esteemed distinctions in China. Enterprises can leverage this status to enhance advertising efforts, improve brand reputation, and increase their chances of winning competitive product bidding projects. The HNTE honour stands alongside China’s renowned brand products, well-known trademarks, and nationally recognized inspection-free products.

3. Talent attraction

Obtaining the status of a high-tech enterprise serves as a compelling factor for skilled individuals when choosing an employer. Here’s one big reason: in China’s top cities like Shanghai, HNTE’s employees are eligible to settle in the city with just one year of work experience under the talent introduction and settlement policies. This policy not only makes high-tech enterprises more appealing to talented individuals but also makes it easier to attract and keep technology professionals on board.

4. Enhanced measurement dimensions for listing and financing

Recognition as a high-tech enterprise can increase a company’s score during the listing process on the National Equities Exchange and Quotations, as well as enhance its valuation during the financing process. This recognition serves as an important measurement factor for potential investors or partners, opening doors to increased opportunities for growth and collaboration.

Shanghai, China

How to become a high and new-technology enterprise?

For foreign companies eyeing HNTE certification, it’s essential to meet specific criteria:

  1. Registration in the Chinese mainland for more than one year when applying for certification.
  2. Products or services falling within 8 key high-tech fields
    • Electronic information technology
    • Biological and medical technology
    • Aviation and space technology
    • New materials technology
    • High-tech services
    • New energy and energy conservation technology
    • Resources and environmental technology
    • Advanced manufacturing and automation
  3. Ownership of intellectual property rights for core technology
  4. A dedicated R&D team constituting at least 10% of the total employees.
  5. Meeting R&D expenditure proportions based on revenue in the past three fiscal years:
    • When the revenue is below CNY 50 million, the R&D expense should be at least 5%
    • When the revenue is between CNY 50 million and CNY 200 million, R&D expense should be less than 4%
    • When the revenue is more than CNY 200 million, R&D expense should be no less than 3%
  6. High-tech products or services contributing to at least 60% of total revenue.
  7. The evaluation of innovative capability shall meet the corresponding requirements.

What are the considerations after becoming a high and new-technology enterprise?

Upon achieving HNTE status, the enterprise must annually submit information on its intellectual property, technical personnel, R&D expenses, and operating income for the previous year before May 31 via the Network for Administration of Accreditation of HNTE. In case of a name change or significant alterations related to accreditation criteria (e.g., division, merger, restructuring), reporting to the HNTE accreditation authority within three months is mandatory.

Non-compliance with reporting or submission of annual development reports for two consecutive years will result in the revocation of HNTE qualification. Additionally, if an accredited HNTE is found to be non-compliant in day-to-day administration, the relevant authorities can request a re-examination by the accreditation authorities. If confirmed as non-compliant, the accreditation authorities will revoke the HNTE qualification and inform tax authorities to recover claimed tax incentives from the year of non-compliance.

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