The Chinese State Administration of Taxation (SAT) recently issued clarification on the definition of income from transfer of technology by resident companies, reports Nair & Co.’s International Tax Team.

1. China Clarifies Enterprise Income Tax incentive for Technology Transfers
Update from Nair & Co. International Tax Team
(Bristol, UK) - The Chinese State Administration of Taxation (SAT) recently issued clarification on the definition of
income from transfer of technology by resident companies, reports Nair & Co.’s International Tax Team. Income
from transfer of technology by a company in China is tax exempt up to CNY 5 million (Excess of CNY 5 million is
taxed at 12.5%).
The recent clarification provides that income from technical advice, technical service and technical training for the
purposes of benefiting from the tax incentive is referred to as those technical advices, services and trainings that
are necessary for conversion of the technology transferred into production and practical use, but subject to certain
conditions (proper drafting of clauses in the transfer contract, payments for technical advice to include certain
prescribed components, etc.).
Further, SAT also announced that income related to after-sale, maintenance and upgrading of the technology
transfer will not qualify for the incentive as such income is not related to technology transfer.
Companies in China planning to undertake technology transfers and intending to make use of the concerned tax
incentives may find the above clarification useful as it reduces ambiguity on the eligibility of certain transactions.
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