BEIJING, July 28 /PRNewswire-Asia/ -- As China's tax system grows more complicated, the scope to reduce or avoid tax has become considerably smaller. Yet, there are still some opportunities for companies to reduce their overall tax burden. One of these opportunities is the concessions for high technology enterprises (http://www.chinaipr.gov.cn/news/enterprise/262272.shtml ). Enterprises that obtain high technology status are entitled to a pref erential corporate income tax rate of 15%, which is substantially lower than China's ordinary 25% corporate tax rate. This can obviously lead to significant tax savings for such enterprises. So-called 'high technology enterprises' are essentially companies which own independent, core IP rights (http://en.wikipedia.org/wiki/Intellectual_property ), and which derive a specified portion of their income from new high technology products. Other requirements include employing of specified numbers of qualified engineers. Tax incentives (http://en.wikipedia.org/wiki/Tax_incentive ) have helped high technology status to be very popular with businesses in China, and to date approximately sixteen thousand enterprises have been granted certification.
Lehman, Lee & Xu (http://www.lehmanlaw.com/ ), a leading red circle law firm, has been at the forefront of assisting clients obtain high technology status. Edward Lehman (http://www.lehmanlaw.com/professionals/attorneys/edwardlehman.html ), Managing Director of firm, comments that "Obtaining status as a high technology enterprise is one of the most significant ways that a company can secure tax savings in China. Interestingly, we have noticed that many clients, particularly foreign investors are not aware of this generous concession."
However, obtaining high-technology status is not simple and such applications are considered very carefully by officials from the State Administration of Taxation (http://www.chinatax.gov.cn/ )(SAT). It is, in fact, quite a lengthy and difficult process and one which requires accomplished tax counsel from professionals with good a relationship with the SAT. "You have to satisfy the officials that you are truly a high technology enterprise. The requirements are actually quite technical," comments Lehman. "Fortunately our people are very experienced in this area and we have managed to have some good successes in this area for our clients. That is always very satisfying as it is one of the reasons you enter into law."
