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October 15, 2021
2021-1881

Mainland China launches nationwide inspection of High and New Technology Enterprises

Executive summary

The National High and New Technology Enterprise (HNTE) Accreditation and Administration Leading Group Office (the National Office) released Guokehuozi [2021] No. 133 (Circular 133) on 15 September 2021, launching a nationwide inspection of the accreditation and administration of HNTEs undertaken by the 36 local HNTE accreditation and administration offices (the Local Offices).

This Alert summarizes the inspection process and implications for accredited HNTEs.

Detailed discussion

The inspection has two phases:

  • Phase 1: Self-inspection will be undertaken by Local Offices between 15 September 2021 and 25 October 2021. Each Local Office is required to submit a self-inspection report covering self-inspection status, key issues identified and rectification results to the National Office by 25 October 2021.
  • Phase 2: The National Office will review the reports submitted in Phase 1.

The inspection will focus on whether the accreditation and administration/supervision performed by the Local Offices is in line with the prevailing rules and regulations, as well as the implementation of the relevant preferential tax treatments.

In particular, the Local Offices are required to perform a review of accredited HNTEs and make rectifications if needed.

  • Local Offices administering more than 10,000 HNTEs should select 20% of HNTEs for review.
  • Local Offices administering up to 10,000 HNTEs should select 30% of HNTEs for review.

The inspection of HNTEs is an ongoing process. Any HNTEs that become disqualified are publicly announced by local authorities after the disqualification.

Implications

In response to Circular 133, it is expected that the Local Offices may roll out new and different approaches to inspect HNTEs in Phase 1 (e.g., self-inspection, desktop review, on-site inspection) and the National Office may conduct a subsequent round of reviews in Phase 2. Therefore, HNTEs should be well prepared for potentially extensive review by both levels of the authorities and seek clarification or consultation with authorities and/or their advisors on uncertain technical issues as soon as possible.

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For additional information with respect to this Alert, please contact the following:

Ernst & Young Tax Services Limited, Hong Kong

Ernst & Young Ernst & Young (China) Advisory Limited

Ernst & Young LLP (United States), China Tax Desk

Ernst & Young LLP (United Kingdom), China Tax Desk, London

Ernst & Young LLP (United States), Asia Pacific Business Group, New York

Ernst & Young LLP (United States), Asia Pacific Business Group, Chicago

 

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