Software and chip firms get more support

Tax cuts and key favorable policies to boost development and upgrade sector

The State Council has provided fresh confidence and impetus to the country's integrated circuit and software sectors with its decision to continue preferential corporate tax policies at an executive meeting on Wednesday.

The Cabinet decided at the meeting, presided over by Premier Li Keqiang, that the country will continue the tax cut and exemption policies for businesses devoted to IC design and those in the software sector starting from tax calculation and collection for last year.

Chip designers and software producers will be exempt from corporate taxes for two years, according to a statement released after the meeting. For the following three years, their corporate taxes will be cut by half, the statement said.

The tax cut followed a decision last year by the country to cut taxes for chipmakers, who had been exempt from corporate income tax for up to five years.

Meanwhile, the meeting also called for accelerated efforts to come up with supporting policies to further promote the development of IC and software industries to a higher level, the statement said.

Han Xiaomin, a senior analyst on the semiconductor sector with the research company CCID Consulting, said the decision by the State Council had offered a major confidence boost to businesses in the IC industry.

"It ensured the continuity of previous policies and stabilized market expectations," he said.

Statistics from the Ministry of Industry and Information Technology showed that the country's IC production was down by 8.7 percent year-on-year in the first quarter, with slumping prices for chips and weak market demand.