Laws of the People's Republic of China
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REGULATIONS OF THE STATE COUNCIL ON
(Promulgated 10 January 1985 by the State Council)
SUBJECT: TECHNOLOGY CONTRACTS
ISSUING-DEPT: STATE COUNCIL OF CHINA
LENGTH: 1151 words
These Regulations concerning technology transfer are formulated in order to arouse the enthusiasm, initiative and creativity of staff and workers, in particular scientific and technical personnel, to bring about the rapid application of scientific and technical research results and knowhow to material production, and to effectively implement the policies of economic construction reliant on science and technology and of the orientation of science and technology to economic construction.
(1) Technical Commodities and the Technology Market
In the context of the socialist commodity economy, technology is also a commodity. Units and individuals may all transfer technology free of the restrictions of regional, departmental or economic structrue. The State has decided to open wide the technology marked and to promote a flourishing of technology trade, in order to promote the development of production.
With regard to any technology which assists the development of new products, which raises product quality, reduces product cost, improves operational management or leads to increased economic benefit, the transferor and transferee may engage in technology transfer in accordance with the principles of voluntary participation and muaual benefit and agreement through consultation. Technology which violates State Law, policy or regulations shall not be transferred. The transfer of technology which involves national security or the confidentiality of which is demanded by the greater economic interest, shall be handled in accordance with the relevant State regulations.
(2) Technology Transfer Fees
A technology transfer fee refers to the price for an item of technology, following adjustment in the marked and consultaion and agreement between the two partices. It may be calculated as one lump sum, as a fixed percentage of increased sales or profits resulting from the implementation of the particular technology, or calculated by another method agreed upon by the two parties.
With the consultation and agreement of the relevant parties to the technology transfer, an intermediary (including a unit or individual) who facilitates trade in an item of technology may receive a reasonable remuneration.
(3) Technology Transfer Contracts
For the transfer of technology, the parties shall sign a technology transfer contract which conforms to the "Economic Contract Law of the People's Republic of China" and the relevant provisions of other laws.
The following items shall be clarified in the contract by the two parties:
(i) whether the parties each require to be informed in detail of any ongoing improvements to the technology in question;
(ii) whether the technology may be transferred to a third party;
(iii) standards and method for acceptance of the transferred technology; and
(iv) whether pre-payment of a fee for instruction in the rudiments of the technology is demanded.
(4) Rights and Interests in Technology Transfer
Technology used in research and development under the plans of the State or those of a relevant high level authority may, in addition to being disseminated for application in accordance with the provisions of the plan, be transferred in accordance with these Regulations by the unit responsible for the technology. Income from such transfers shall belong to that unit. Personnel directly involved in the research and development of the technology in question shall be rewarded.
Income derived from the transfer of technology resulting from research and development carried out under the plan of a particular unit shall belong to that unit. Personnel directly involved in the research and development of the technology in question shall be rewarded. Personnel who contribute by initiating research and development project proposals in response to marked demands, and who actively work to complete them, shall be rewarded more liberally.
Personnel who contribute by assisting the transferee in a technology transfer to fully grasp the transferred technology shall be rewarded in the same way as those personnel who directly participate in the research and development of the technology.
Providing they perform their own job well and do not violate the technological rights or interests of the unit, the income derived from the transfer of technology resulting from individual research and development by personnel may be retuned to those personnel or to the team. If materials or equipment of the unit were used, a fee for use shall be paid in accordance with the prior agreement with the unit. The rights and interests with regard to technology researched and developed on commission from another unit shall be handled in accordance with the provisions of the commission contract.
(5) Payment of Technology Transfer Fees
Lump sum technology transfer fees paid by units under the ownership of the whole people or by collectively owned units shall be paid out of managemnet fees and, where the amount is relatively large, may be amortised by instalments. Where the fee comprises a percentage of increased sales or profit, it shall be paid out of the increased pre-tax profit after the implementation of the technology. In the case of a unit under the ownership of the whole people, it shall be paid out of the cash surplus of operating expenses or out of txtra-budgetary income. In the absence of a cash surplus of operating expenses or of txtra-budgetary income, it shall be paid out of operating expenses.
(6) Taxation of Technology Transfer
Where the total net annual income from technology transfer of a unit under the ownership of the whole people or of a collectively owned unit does not exceed 100,000 yuan, it shall be exempt from income tax, and the entire amount retained by the unit. Where the amount exceeds 100,000 yuan, the excess amount shall be taxed in accordance with the law. Major specialist institutes, scientific research units and other units under the ownership of the whole people shall be exempt for three years from income tax on income derived from technology transfer, and the entire amount shall be retained by the unit for use in the development of scientific research. Individual income tax in accordance with the law.
(7) Use of Income from Technology Transfer
The use of income from technology transfer which is retained by a unit shall be determined by the unit itself. Its use shall not be directed or restricted by a higher authority or other relevant department.
Units engaged in technology transfer shall deduct five to ten percent of their net retained income from technology transfer for the rewards stipulated under Article 4. Distribution shall be supervised by the responsible person for the project and shall not be interfered with by the unit itself or other relevant departments. This cost shall not be calculated as part of the unit's total bonus.