State Council issues new policies for high-quality development of the IC and software industries

To the people’s governments of all provinces, autonomous regions and municipalities directly under the Central Government; all ministries and commissions of the State Council; and all institutions directly under the State Council:

The Several Policies to Promote the High-Quality Development of the Integrated Circuit Industry and the Software Industry in the New Era are hereby issued to you for diligent implementation.

Several Policies to Promote the High-Quality Development of the Integrated Circuit Industry and the Software Industry in the New Era

The integrated circuit and software industries are the core of the information industry and the key force leading a new round of technological and industrial change. Since the issuance of the Notice of the State Council on Printing and Distributing Several Policies to Encourage the Development of the Software Industry and the Integrated Circuit Industry (Guofa [2000] No. 18) and the Notice on Printing and Distributing Several Policies to Further Encourage the Development of the Software Industry and the Integrated Circuit Industry (Guofa [2011] No. 4), China’s integrated circuit and software industries have developed rapidly, strongly supporting national informatisation and promoting sustained and healthy economic and social development. To further improve the environment for both industries, deepen international cooperation and raise innovation capability and development quality, the following policies are formulated.

I. Fiscal and tax policies

(1) For State-encouraged integrated circuit production enterprises or projects with a line width below 28 nanometres (inclusive) and an operating period of 15 years or more, enterprise income tax is exempted from the first to the tenth year. For those with a line width below 65 nm (inclusive) and an operating period of 15 years or more, enterprise income tax is exempted from the first to the fifth year and levied at half the statutory rate of 25% from the sixth to the tenth year. For those with a line width below 130 nm (inclusive) and an operating period of 10 years or more, enterprise income tax is exempted in the first and second years and levied at half the statutory rate of 25% from the third to the fifth year. Losses incurred in a tax year by State-encouraged production enterprises with a line width below 130 nm (inclusive) may be carried forward to later years for a maximum of 10 years.

For those enjoying preferential treatment as integrated circuit production enterprises, the preferential period is counted from the year profits are made; for those enjoying it as production projects, from the tax year in which the project first receives production and operating income. The list of State-encouraged production enterprises and projects is drawn up by the National Development and Reform Commission and the Ministry of Industry and Information Technology together with the relevant departments.

(2) State-encouraged integrated circuit design, equipment, materials, packaging and testing enterprises and software enterprises are exempt from enterprise income tax from the first to the second year starting with the year profits are made, and pay it at half the statutory rate of 25% from the third to the fifth year. The criteria for State-encouraged design, equipment, materials, packaging and testing enterprises are set by the Ministry of Industry and Information Technology together with the relevant departments.

(3) State-encouraged key integrated circuit design enterprises and key software enterprises are exempt from enterprise income tax from the first to the fifth year starting with the year profits are made, and pay it at a reduced rate of 10% in subsequent years. The lists of such enterprises are drawn up by the National Development and Reform Commission and the Ministry of Industry and Information Technology together with the relevant departments.

(4) The conditions and scope of the income tax preferences for integrated circuit enterprises or projects and software enterprises are adjusted dynamically in line with technological progress in the industry. Enterprise income tax for integrated circuit design enterprises and software enterprises in years before these policies take effect is handled under the “two years exempt, three years half” preference set out in Guofa [2011] No. 4.

(5) VAT preferences for integrated circuit enterprises and software enterprises continue to apply.

(6) For a period, production enterprises making logic circuits and memory with a line width below 65 nm (inclusive), and those using specialty processes with a line width below 0.25 micrometres (inclusive) (including mask and 8-inch-and-above wafer producers), are exempt from import duty on productive raw materials and consumables for their own use, on clean-room-specific building materials, supporting systems and spare parts for production equipment; production enterprises making compound semiconductors with a line width below 0.5 micrometres (inclusive) and advanced packaging and testing enterprises are exempt from import duty on productive raw materials and consumables for their own use. Specific policies are formulated by the Ministry of Finance with the General Administration of Customs and other departments; the enterprise lists and duty-free commodity lists are drawn up by the National Development and Reform Commission and the Ministry of Industry and Information Technology with the relevant departments.

(7) For a period, State-encouraged key integrated circuit design enterprises and key software enterprises, and the production enterprises and advanced packaging and testing enterprises in item (6), are exempt from import duty on equipment for their own use, and on technology (including software), ancillary parts and spare parts imported with the equipment under contract, except goods listed in the catalogue of imported goods not eligible for duty exemption. Specific policies are formulated by the Ministry of Finance with the General Administration of Customs and other departments.

(8) For a period, import VAT on newly imported equipment for major integrated circuit projects may be paid in instalments. Specific policies are formulated by the Ministry of Finance with the General Administration of Customs and other departments.

II. Investment and financing policies

(9) Strengthen service and guidance for the construction of major integrated circuit projects, guide and regulate the order of industry development, do planning and layout well, strengthen risk warnings and avoid low-level duplication of construction.

(10) Encourage and support integrated circuit enterprises and software enterprises in strengthening resource integration. For restructuring and mergers carried out on market principles, relevant State Council departments and local governments shall actively support and guide them and shall not impose restrictions of any form beyond laws, regulations and policies.

(11) Make full use of existing national and local government investment funds to support the two industries; encourage social capital to raise funds through multiple channels on market principles, set up investment funds and improve their market orientation.

(12) Encourage local governments to establish loan risk compensation mechanisms and support integrated circuit and software enterprises in obtaining commercial loans through intellectual property pledges, equity pledges, accounts receivable pledges, supply-chain finance, and technology and IP insurance. Give full play to financing guarantee institutions in providing guarantees of various forms to small and micro enterprises in these fields.

(13) Encourage commercial financial institutions to improve financial services further, increase medium- and long-term lending to the two industries, actively innovate credit products suited to their development, and — where risk is controllable and business is sustainable — increase financial support for major projects; guide insurance funds into equity investment; support bank wealth-management companies, insurers, trusts and other non-bank financial institutions in launching dedicated asset-management products.

(14) Strongly support qualified integrated circuit and software enterprises in listing and raising funds at home and abroad, speed up the domestic listing review process, and allow R&D expenditure meeting the relevant conditions of accounting standards to be capitalised. Encourage and support qualified enterprises to list on the STAR Market and ChiNext and to smooth exit channels for their original shareholders. Provide equity financing and equity transfer services for enterprises at different stages of development through capital markets at different levels, broadening direct financing channels and raising the share of direct financing.

(15) Encourage qualified integrated circuit and software enterprises to issue enterprise bonds, corporate bonds, short-term financing bills and medium-term notes, widening financing channels and supporting enterprises in raising funds from the bond market through medium- and long-term bonds.

III. Research and development policies

(16) Focus on R&D of key core technologies in high-end chips, integrated circuit equipment and process technology, key materials, design tools, basic software, industrial software and application software, and keep exploring a new type of nationwide system for tackling key core technologies under socialist market economy conditions. The Ministry of Science and Technology, the National Development and Reform Commission, the Ministry of Industry and Information Technology and other departments shall organise implementation and give support through the National Key R&D Programme and National Science and Technology Major Projects.

(17) In advanced storage, advanced computing, advanced manufacturing, high-end packaging and testing, key equipment and materials, and next-generation semiconductor technology, promote the building of various innovation platforms in line with the characteristics of the industry. The Ministry of Science and Technology, the National Development and Reform Commission and the Ministry of Industry and Information Technology shall give priority to supporting R&D projects on these platforms.

(18) Encourage software enterprises to apply national standards for software quality, information security and development management. Strengthen standardisation bodies in integrated circuits, improve the standards system, strengthen standard verification and raise R&D capability — improving the quality of integrated circuits and software and strengthening the industry’s competitiveness.

IV. Import and export policies

(19) For a period, where State-encouraged key integrated circuit design enterprises and key software enterprises need to import equipment for their own use temporarily (including development and test equipment), software and hardware environments, prototypes, components and parts, they may complete customs formalities for temporarily imported goods where they meet the requirements, with import taxes handled under current regulations.

(20) For software export contracts signed by software enterprises with foreign enterprises of high credit standing, financial institutions may provide financing and insurance support on the principles of independent credit assessment and controllable risk.

(21) Promote the export of integrated circuits, software and IT services, vigorously develop international service outsourcing, and support enterprises in building overseas marketing networks. The Ministry of Commerce, with the relevant departments, shall establish long-term cooperation mechanisms with key countries and regions and take comprehensive measures to create conditions for enterprises to expand into emerging markets.

V. Talent policies

(22) Further strengthen integrated circuit and software programmes in universities, accelerate the establishment of integrated circuits as a first-level discipline, adjust curricula, teaching plans and teaching methods promptly in line with industry needs, and strive to cultivate high-level interdisciplinary and practical talent. Strengthen teaching staff, teaching laboratories and internship and training bases for these programmes; the Ministry of Education, with the relevant departments, shall strengthen supervision and guidance.

(23) Encourage qualified universities to work with integrated circuit enterprises in accelerating the building of demonstrative microelectronics colleges. Give priority to building industry-education integration enterprises in the integrated circuit field. Pilot enterprises within the cultivation scope may, where their investment in vocational education meets the requirements, offset 30% of that investment against the education surcharges and local education surcharges payable for the year. Encourage relevant industry investment funds to increase input and support universities working with enterprises to build dedicated resource libraries for integrated circuit talent training. Support demonstrative microelectronics colleges and specialised demonstrative software colleges in cooperating with internationally renowned universities and multinational companies, introducing foreign faculty and quality resources, and jointly training integrated circuit and software talent.

(24) Encourage local authorities, in accordance with relevant State provisions, to commend and reward top talent, high-level engineers and R&D designers who have made outstanding contributions in these fields, and to improve equity incentive mechanisms. Through relevant talent programmes, step up the introduction of leading experts, outstanding talent and teams. Give priority to exploring policies for attracting integrated circuit and software talent in industry cluster areas. Formulate and implement annual plans for attracting and training such talent, promote the building of a national international training base, and focus on medium- and long-term training for talent in short supply.

(25) Strengthen industry self-discipline, guide the rational and orderly flow of integrated circuit and software talent, and avoid vicious competition.

VI. Intellectual property policies

(26) Encourage enterprises to register layout designs of integrated circuits and software copyrights. Support integrated circuit and software enterprises in applying for intellectual property in accordance with the law, and provide support where the relevant provisions are met. Vigorously develop IP services related to integrated circuits and software.

(27) Strictly implement the intellectual property protection system for integrated circuits and software and increase punishment for infringement. Strengthen protection of layout designs of integrated circuits and of software copyright in the online environment, actively develop and apply network copyright protection technology for genuine software, and effectively protect integrated circuit and software intellectual property.

(28) Explore a long-term mechanism for software legalisation. Software pre-installed on computers sold in China (including mainframes, servers, microcomputers and laptops) must be genuine, and computers pre-installed with non-genuine software are prohibited from being sold. Fully implement policies on the use of genuine software by government agencies, apply government centralised procurement to general software and strengthen the management of software assets. Make the use of genuine software in important industries and key fields institutionalised and standardised. Strengthen publicity, training, supervision and inspection, and create a good environment for using genuine software.

VII. Market application policies

(29) Through policy guidance and with market application as the driver, increase the promotion of innovative integrated circuit and software products and drive continuous technological and industrial upgrading.

(30) Advance the clustered development of the two industries, support the building of IT service industry clusters and integrated circuit industry clusters, and support software parks in becoming specialised and high-end.

(31) Support leading enterprises, research institutes, universities and other innovation actors in building specialised innovation service institutions such as specialised maker spaces, optimising the allocation of technology, equipment, capital and market resources, providing specialised services focused on integrated circuits and software on market principles, and achieving the integrated development of large, medium and small enterprises. Increase support for specialised service platforms serving the two industries — maker spaces, technology business incubators, university science parks — and improve their service capability.

(32) Actively guide the development of IT R&D and application business into service outsourcing. Encourage government departments, through service procurement, to hand over e-government construction, data-centre construction and data processing work that falls within government responsibilities and is suited to market provision to qualified software and IT service institutions. Promptly formulate and improve the corresponding security review and confidentiality management rules. Encourage large and medium-sized enterprises to set up specialised software and IT service firms based on their IT R&D and application units.

(33) Improve the system for protecting consumer privacy and trade secrets in the online environment and promote the networked development of software and IT services. Promote software products and services that meet security requirements in government agencies and public institutions at all levels.

(34) Further regulate market order in the two industries, strengthen anti-monopoly enforcement, crack down on monopolistic behaviour in accordance with the law, conduct anti-monopoly reviews of undertakings, and maintain fair competition in the market. Strengthen anti-unfair-competition enforcement and crack down on unfair competition of all kinds.

(35) Give full play to industry associations and standardisation bodies, speed up the formulation of standards related to integrated circuits and software, and promote integrated circuit quality evaluation and software development cost measurement specifications.

VIII. International cooperation policies

(36) Deepen global cooperation in the two industries and actively create a good environment for international enterprises to invest and develop in China. Encourage domestic universities and research institutes to strengthen cooperation with high-level overseas universities and research institutions, and encourage international enterprises to build R&D centres in China. Strengthen communication between domestic industry associations and international industry organisations, support domestic enterprises in cooperating with international enterprises at home and abroad, and participate deeply in the international division of labour and in international standards-setting.

(37) Promote the “going global” of the two industries. Facilitate domestic enterprises in jointly building R&D centres overseas and make better use of international innovation resources to raise the level of industry development. The National Development and Reform Commission, the Ministry of Commerce and other departments shall improve services and create a good environment for enterprises to invest and cooperate abroad.

IX. Supplementary provisions

(38) Qualified integrated circuit enterprises (including design, production, packaging, testing, equipment and materials enterprises) and software enterprises established in China, regardless of ownership, may enjoy these policies.

(39) These policies are interpreted by the National Development and Reform Commission together with the Ministry of Finance, the State Taxation Administration, the Ministry of Industry and Information Technology, the Ministry of Commerce and the General Administration of Customs.

(40) These policies take effect from the date of issuance. Policies set out in Guofa [2000] No. 18 and Guofa [2011] No. 4 continue to apply; where they are inconsistent with these policies, these policies prevail.