I. Tax Policies
1.Income tax
Income tax is a kind of tax enjoyed by the central and local government. Under general conditions, the central government levies income tax at the rate of 30%. The local government levies income tax at the rate of 3%. Foreign-invested enterprises satisfying the following conditions may enjoy corresponding income tax incentives:
(1) For foreign-invested enterprises, corporate income tax rate stands at 15% while the local income tax levied at the rate of 3% is also exempted.
(2)Foreign-invested enterprises engaged in the development and operation of ports, wharves, energy and traffic projects with duration of over 15 years may enjoy 5 years of corporate income tax exemption from the profit-making year and half reduction for the ensuing 5 years.
(3) Manufacturing foreign-invested enterprises may enjoy 2 years of corporate income tax exemption from the profit-making year and half reduction for the ensuing 3 years. Export-oriented enterprises at the expiration of tax exemption and reduction period enjoy a reduced rate of 10% for income tax provided the export volume accounts for 70% of the total industrial output. Manufacturing enterprises using state-of-the-art technology at the expiration of tax exemption and reduction period are entitled to a reduced tax rate of 10% for a 3-year extension.
(4) The foreign-invested enterprises engaged in service sector with investment of over USD 5 million and duration of over 10 years may enjoy 1 year of corporate income tax exemption from the profit-making year and half reduction for the ensuing 2 years.
(5) Sino-foreign joint venture or foreign banks established in Shenzhen Economic Special Zone with total investment of over USD 100 million and duration of over 10 years may enjoy 1 year of corporate income tax exemption from the profit-making year and half reduction for the ensuing 2 years.
(6) Manufacturing high-tech foreign-invested enterprises may enjoy 2 years of corporate income tax exemption and half reduction for the ensuing 6 years. At the expiration of tax exemption and reduction period, such enterprises enjoy a reduced rate of 10% for income tax provided the export volume accounts for 70% of the total industrial output.
(7) High-tech result transformation projects owning independent intellectual property right may enjoy 5 years of corporate income tax exemption and half reduction for the ensuing 3 years. After the new projects constructed by high-tech enterprises by absorbing and digesting high technologies are put into production, such enterprises may enjoy the exemption from corporate income tax for three years on the profit obtained from such projects regardless of previous tax incentives.
(8) The municipal financial authority shall return 100% of the income tax actually paid for the profit increased by state-level new products or the invention patented products first produced in Shenzhen and provincial/municipal-level new products and utility model patented products first produced in Shenzhen within three years (for the first case) or two years (for the latter case) from the date of sales.
(9) Software enterprises may enjoy 2 years of corporate income tax exemption from the profit-making ear and half reduction for the ensuing 3 years. Those certified as high-tech enterprises may enjoy 2 years of corporate income tax exemption and half reduction for the ensuing 6 years. Key software enterprises enjoy 5 years of corporate income tax exemption and half reduction for the ensuing 5 years. For the corporate income tax paid for the third to fifth year which is levied at half reduced rate, the municipal financial authority shall provide corresponding allowance. If key software enterprises did not enjoy tax incentives in the current year, the corporate income tax shall be levied at the rate of 10%.
2.VAT
The rate of VAT is 17%. A low rate of 13% is provided. Foreign-invested enterprises satisfying the following conditions may enjoy corresponding tax incentives:
(1) As for high-tech result transformation projects with independent intellectual property right, 50% of the local-sharing portion of VAT shall be returned by municipal authority for eight years.
(2) the municipal financial authority shall return 50% of the local-sharing portion of VAT increased by state-level new products or the invention patented products first produced in Shenzhen within three years (for the first case) or two years (for the latter case) from the date of sales.
(3) Simultaneous levy and refund is applied to the part exceeding 3% of the total VAT paid by software enterprises that are general taxpayers of VAT at the statutory tax rate of 17% for the sales of independently developed software products before the end of 2010. The refunded tax shall not be subject to the levy of corporate income tax.
(4) Simultaneous levy and refund is applied to the part exceeding 6% of the total VAT paid by integrated circuit manufacturers that are general taxpayers of VAT at the statutory tax rate of 17% for the sales of self-produced integrated circuit products. The refunded tax shall not be subject to the levy of corporate income tax.
(5) Self-use equipment and relevant technologies (including software), supporting parts and spare parts imported by software enterprises are exempt from tariff and import-related VAT.
(6) Integrated-circuit technologies, complete set of production equipment, equipment and apparatuses specially for integrated-circuit, self-use raw materials and consumables for production imported by integrated-circuit manufacturing enterprises are exempt from tariff and import-related VAT.
(7) 50% of the additional local-sharing portion of VAT will be refunded to the high-tech enterprises and high-tech projects within three years with the figure of the previous year as the base.
(8) The additional local-sharing portion of VAT will be refunded to the computer software reaching domestically advanced level whose annual sales amount exceeds RMB 10 million within three years.
3.Business tax
Business tax is divided on trade basis. Business tax rate ranges between 3%-20%. The business tax rate applicable to traffic, transportation and construction is 3%. The business tax rate applicable to commercial service, insurance and entertaining business is 5%, 8% and 20% respectively. Foreign-invested enterprises satisfying the following conditions may enjoy corresponding tax incentives:
(1) Foreign banks or Sino-foreign equity joint venture banks with a duration of over 10 years and total investment of over RMB 100 million are exempt from business tax for the income from financial business for 5 years commencing on the date of opening.
(2) High-tech result transformation projects owning independent intellectual property right may enjoy 5 years of business tax exemption and half reduction for the ensuing 3 years.
4.Individual income tax
Individual income tax adopts progressive tax rate in excess of specific amount. The part of monthly wage of domestic employees exceeding RMB 1,600 is subject to individual income tax, The part of monthly wage of foreign employees exceeding RMB 4,000 is subject to individual income tax. The individual income tax rate has 9 levels and ranges between 5%-45%. The individuals satisfying the following conditions may enjoy corresponding tax incentives:
If the shares rewarded and distributed by high-tech enterprises and high-tech projects to their employees are reinvested in their production and operation, individual income tax shall be exempted. If dividends have been paid or transferred, individual income tax shall be levied according to the actual amount of gains.

II. Financial Subsidy
Shenzhen established software enterprise development center. The government shall provide subsidy to new software enterprises entering the center from special fund for science and technology.
Shenzhen established integrated circuit industrial park. Integrated circuit manufacturers approved to enter the park shall be exempted from transfer fee of land use right, fee of municipal support facilities and land development fee. For the integrated circuit manufacturers that start operation prior to 2005, the charge for electricity and water (including discharge fee) for production use is respectively RMB 0.5 per kWh and RMB 1.5 per ton. Financial subsidy shall be given to the part of charge for electricity and water exceeding the above standard within 5 years. Municipal financial authority shall give subsidy in respect of power supply (distribution) according to actual conditions.

III. Land Policies
1. Half of the land use fee for the land for industrial use utilized by certified export-oriented enterprises will be exempted. Half of the land use fee for the certified enterprises using advanced technology will be exempted for 5 years.
2. The transfer fee of the land use right of the land for scientific research and production of high-tech enterprises or high-tech projects shall be exempted. Te transaction commission, property right registration fee and relevant charge in connection with the purchase of premises shall be exempted. The deed tax shall be returned by the financial authority according to the amount of actual payment.
3. The house property tax payable for the premises built or purchased by high-tech enterprises or for high-tech projects shall be exempted within five years from the date of construction completion or purchase.

IV. Encouraging Fund
1.The municipal government shall appropriate special fund for supporting the development of software industry.
2.The municipal governmental shall appropriate science and technology fund and encourage enterprises to make more investment in science and technology.
3.The municipal government shall appropriate fund as the undertaking initiation subsidy to returned personnel. Certain proportion of science and technology fund shall be allocated each year to support the returned personnel who bring high-tech results and projects to Shenzhen and be engaged in transformation of technical results and the R&D of high-tech projects.
4.Domestic and foreign universities and scientific research institutes are encouraged to establish bases integrating production, study and research, bases for transforming technical research results, training centers, post-doctoral mobile working stations, etc. in Shenzhen through cooperation and be engaged in scientific research, technology development and personnel training. Shenzhen virtual University Park shall be built in the high-tech industry area. Office facilities, network and communication equipment, etc. shall be provided to the universities entering the park free of charge. Enterprises are encouraged to set up engineering technology R&D centers and post-doctoral mobile stations. Municipal government shall give financial support of RMB 5 million and 3 million respectively to each center and station of state level and municipal level and subsidy of RMB 50,000 to each postdoctor entering the center and working station each year.

V. Personnel Policies
1.The professionals with regular college education or above who have worked in high-tech enterprises for over two years may have permanent registered residence in Shenzhen. The personnel transferred in with university education or above or professional title of technician or above shall be exempted from city infrastructure expansion fee. The spouses of the personnel with semi-senior professional title or above and returned personnel needed by high-tech enterprises and high-tech projects may be transferred in with them simultaneously. If the returned personnel work in Shenzhen, their children shall enjoy the same treatment given to permanent residents of Shenzhen in respect of admission to schools.
2.Software system analysts and system engineers engaged in software work and software development personnel with university education or above, or college education or above and semi-senior professional titles or above or with important inventions and creations, their spouses and minor children are allowed to settle in Shenzhen (irrespective of transfer with spouse or work transport) and exempted from city infrastructure expansion fee.
3.If the domestic and foreign senior professional technical and managing personnel engaged by integrated circuit manufacturers purchase commodity residential houses in Shehzhen, the payment for such courses may set off their taxable income and the method of refund after levy may be adopted.
4.If the domestic and foreign senior professional technical and managing personnel needed by integrated circuit manufacturers purchase commodity residential house settle in Shenzhen, they shall be free from the restriction of the norm of registered permanent residence of Shenzhen and enjoy exemption of city infrastructure expansion fee.
5.Municipal government shall create Shenzhen Science and Technology Contribution Prize (Mayor’s Prize) to handsomely reward the technical personnel who have made outstanding contribution to the industrialization of high-tech results of Shenzhen and created great economic benefits.

VI. Intellectual Property Right
China has promulgated a series of laws and regulations on the protection of intellectual property rights including the Patent Law of the People’s Republic of China, the Copyright Law of the People’s republic of china and the Regulations on the Protection of Computer Software. Relevant governmental agencies of Shenzhen have attached great importance to the management and protection of intellectual property right, made efforts to sharpen the social awareness of protecting society, resolutely investigated and punished various actions of infringement upon intellectual property rights and timely handled the disputes over intellectual property rights.

VII. Miscellaneous
1.Integrated circuit manufacturers may set aside 15% of the net sales as R&D fee. If the R&D fee drawn is not used up in the current year, the balance may be carried over to the next year. If the investment of an enterprise in R&D exceeds the amount of R&D fee drawn, the exceeding part may be stated as R&D expenses.
2.Accelerated depreciation may be conducted to the production and research equipment of high-tech enterprises and high-tech projects. The shortest depreciation term of the production equipment of integrated circuit manufacturers may be three years.