China (Shanghai) Pilot Free Trade Zone, the first one in China established in Shanghai Municipality in 2013, was extended in August 2019 by the State Council to include Lingang New Area. According to the “General Plan for Lingang New Area of China (Shanghai) Pilot Free Trade Zone” (Guo Fa  No. 15), the primary purpose is to create an international economic zone with a competitive tax system and support for foreign investments.
On July 31st, 2020, the Ministry of Finance and the State Administration of Taxation jointly issued the “Circular on the Company Income Tax Policies for Key Industries in the Lingang New Area of China (Shanghai) Pilot Free Trade Zone” (Cai Shui  No. 38), that is effective retrospectively from January 1st, 2020.
These new measures apply to enterprises who simultaneously comply with the following conditions:
the enterprise should be engaged in the production or research and development of products in the key industries mentioned in the “Catalogue of Key Field and Core links” under the following categories: Integrated circuits; Artificial intelligence; Biomedicine; Civil aviation. The eligible enterprise shall have fixed production and R&D premises with permanent staff and IT support.
the enterprise must be a legal entity, and it should be registered in the Lingang New Area from January 1st, 2020, excluding those who relocated to New Area from other areas and should be mainly engaged in substantial production or R&D activities in key industries mentioned above.
at least one key product shall be included in the main R&D or sales products of the enterprise.
Furthermore, the Circular allows the eligible enterprises to choose between different sub-conditions. Enterprises only need to meet one of the following sub-conditions:
the investor has a leading international market influence in the industry or is in a leading position in the domestic market segment.
the enterprise has a talented core team and has engaged in scientific research and production in related fields.
The enterprises which comply with these measures are eligible for a reduced company income tax rate of 15% (instead of the standard 25%), for five years starting from the date of establishment.
In addition, the Shanghai Municipal Finance and Taxation Department should work with the industry authorities to formulate specific operational and administrative measures for key industrial enterprises and report them to the Ministry of Finance and the State Taxation Administration for the record.
The preferential tax policy to be adopted in Lingang New Area grants the same CIT rate applicable to enterprises with high-tech status, but does not require eligible companies to meet the same strict requirements, as the ratio of the revenue from high-tech products and services or the number of staff dedicated to R&D activities.