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Preferential Policies Given to Listing Software Firms

The State Council has recently published Policies on Encouraging the Development of Software and Integrated Circuit Industries (hereinafter referred to as Policies). This will strengthen the innovative ability and international competitiveness of the information industry and promote the reform and product upgrading of traditional industries, according to the State Development Planning Commission.

Policies are meant to help achieve the following goals by 2010: that Chinese software development and production capacity may reach or nearly reach the internationally advanced level and that integrated-circuit (IC) production may largely meet the demand of the domestic market.

Policies include procedures for establishing a venture-capital mechanism for the software industry, drawing up and cultivating preferential tax rates for software and IC enterprises, supporting the efforts of qualified software enterprises to raise funds through going on the market and setting up a distribution mechanism which encourages talented people in the software field.

To attract more funds into the software industry, Policies encourage venture capital be invested in this field. The shares of a software enterprise held by a venture capital investor can go on the market the very day the enterprise is listed on the stock market. It is stipulated that software enterprises, no matter in what kind of ownership, will receive preferential treatment if they meet the requirements of the stock market. In evaluating the assets of software enterprises with high market potential and advantages in talent, the proportion of intangible assets to net assets can be decided by the investor. Software enterprises having received approval for listing on the overseas stock market may apply for raising funds abroad. These items have created favorable conditions for software enterprises that want to go on the market and raise funds both in China and in foreign countries.

Policies stipulate that if software enterprises at the growth market give subscription rights to high-level managers and key technical members within themselves, they should reveal it in detail while inviting shareholders and provide necessary detail files to the stock market in line with growth enterprise market rules. The proportion of subscription rights as mentioned above in publicly distributed stocks should be decided by the board of directors.

Policies also stipulate that by 2010, common taxpayers will be levied a 17 percent value added tax (VAT) on sales of software products developed by their own companies. Newly founded software enterprises, after confirmation, can enjoy two years of tax exemption and three years of 50 percent exemption starting from the first year of earning profits. Key software enterprises under government planning and distribution will receive a 10 percent tax reduction if they do not enjoy any other exemption or reduction in taxes. IC products will also be levied a 17 percent VAT by 2010. As for enterprises with an investment of over 8 billion yuan and whose products with a line width less than 0.25 micrometer, preferential policies will be the same as those given to energy and transport sectors receiving foreign investment.

Software enterprises will be examined every year. If one fails to pass the annual examination, it will be deprived of its software-enterprise qualification and relevant preferential policies. The certificate standard of software enterprises will be worked out by the Ministry of the Information Industry and relevant departments.


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