Semiconductor industry VAT rebates are not extended

Over the past five years, the State Council's "Alternative Notice on Printing and Distributing Policies to Further Encourage the Development of the Software Industry and Integrated Circuit Industry" (hereinafter referred to as "Document 18") has finally been introduced. Although the document has many initiatives to support the development of the software industry, the semiconductor VAT tax rebate preferential policy that has attracted the attention of the industry has not been extended.

On February 9, the General Office of the State Council promulgated the "Policy to Further Encourage the Development of the Software Industry and the Integrated Circuit Industry", which will be formally implemented from now on.

On January 12, Premier Wen Jiabao of the State Council presided over the executive meeting of the State Council to study and deploy policies and measures to further encourage the development of software and integrated circuit industries. At that time, the Shanghai Semiconductor Industry Association Secretary-General Jiang Shoulei told China Business News that this was a signal from the central government level, that is, the new document No. 18 would be implemented. Half a month passed and it really came true.

The original No. 18 document was formulated in 2000. Since its enactment, China's software and integrated circuit industries have achieved rapid development and are known as the "golden 10 years." However, as of now, compared with many overseas countries and regions, the development base of China's software industry and integrated circuit industry is still relatively weak, innovation ability is not strong, and the industrial chain still lacks true autonomy.

Taking the software industry as an example, the sum of all local software revenues is less than one Microsoft. For semiconductors, for example, the revenue of all semiconductor design companies in the mainland was lower than that of the world's 10th largest giant Taiwan MediaTek, while all local semiconductor companies had lower revenues. Intel.

In 2005, under pressure from the United States, China abolished the original 18th document regarding a VAT incentive measure. This is regarded as the United States' worries about the rise of the semiconductor industry in China because the VAT preferences for the software industry have not been eliminated.

After the abolition of this concession, although other terms continue, market participants still believe that it is in a period of policy vacuum because the original document has expired at the end of last year and the New Deal needs to be introduced. In 2006, Ding Wenwu, deputy director of the Department of Electronic Information of the Ministry of Industry and Information Technology, disclosed to the newspaper that Alternative Policy No. 18 has been listed in the State Council's 2006 legislative plan and will be introduced soon. However, only 5 years have actually been implemented.

The difference between the New Deal and the original document is mainly the increase of investment and financing support and other elements. Most of the tax benefits have also been extended and strengthened. For example, it will continue to implement the software VAT preferential policies and further implement and improve the relevant business tax preferential policies.

Semiconductor companies with production processes less than 0.8 micron (inclusive) will be exempted from corporate income tax from the first year to the second year, and will be levied at the statutory tax rate of 25% for the third to the fifth year. "Two exemptions, three reductions, and half"; for semiconductor manufacturing companies with processes less than 0.25 micron or an investment of more than 8 billion yuan, corporate income tax is levied at a reduced tax rate of 15%, of which the operating period is 15 years or more, and the income tax year starts from the enterprise income tax. "Five exemptions and five halvers." Previously, the procurement tax rebate for key equipment that semiconductor manufacturing companies had suffered was cancelled. Although the New Deal did not respond specifically, it stressed that the Ministry of Finance will work with relevant departments to formulate policies.

However, what is embarrassing is that the semiconductor VAT tax rebate policy has not been continued. In the minds of many industrialists, this is a key discount. The source analyzed and said: "This may still worry that the United States will make irresponsible remarks."

However, according to Gu Wenjun, a semiconductor research expert and senior analyst at iSuppli China, the benefits offered by other parties in the New Deal diluted the effect of the value-added tax component. For example, to support cross-regional restructuring and mergers and acquisitions, relevant State Council departments and local governments will actively guide, "to prevent the establishment of various forms of obstacles." Moreover, a variety of venture capital guiding funds will also participate in supporting small and medium-sized software companies and integrated circuit companies to start businesses. Those light companies that used to be passive due to lack of fixed assets will obviously benefit.