On 24 October 2024, the Shenzhen Municipal Committee’s Office of the Financial Committee promulgated the Action Plan for Promoting High-Quality Development of Venture Capital Investment in Shenzhen (“Action Plan”). The document was released as a consultation draft, inviting public input. The deadline for feedback submission was 31 October 2024.
The Action Plan sets an ambitious target of registering more than 10,000 equity investment and venture capital funds by the year 2026. Among its key initiatives are incentivising venture capital firms to make early-stage investments in high-potential, emerging advanced technologies, creating multiple channels to facilitate a sustained flow of funding, and widening the range of exit mechanisms for investors. To accelerate the industry’s growth, the document also outlines measures to foster a more supportive environment and to streamline the provision of collaborative business services.
In addition, the Action Plan details the application of tax policies relevant to venture capital entities and their individual partners. Specifically, it stipulates that partners choosing to adopt single-fund investment accounting may be subject to a 20 per cent individual income tax rate on gains derived from equity transfers and dividends. For venture capital firms and individual angel investors who make direct equity investments in science and technology companies during the seed or start-up stages, 70 per cent of the investment amount can be deducted from their taxable income two years post-investment.
Widening the scope of venture capital investment plays a crucial part in drawing in foreign capital, propelling technological progress, and spurring industrial upgrades, all of which will provide fresh impetus for the high-quality growth of China’s economy.