Netease.com Inc, China's second-biggest Internet games provider, may get approval this year to pay a lower income tax rate after its payments in the first quarter rose more than threefold.

The game company is in the process of applying for tax incentives offered by the Chinese government for technology companies, Acting Chief Financial Officer Onward Choi said yesterday during a conference call. Eligible businesses that qualify for the incentives pay a rate of 15 percent, compared with the 25-percent corporate rate, Choi said.

NetEase posted its third profit decline in four quarters after income tax rose to 114.8 million yuan (US$16.5 million) from 33.6 million yuan a year earlier. The Beijing-based firm has struggled to increase sales as rivals offer players games for free, while selling virtual weapons and vehicles for use in their titles. NetEase charges fees for its most-popular games.

"China wants to encourage technology companies and so taxes shouldn't be an issue in the long term," Edward Yu, CEO of research company Analysys International, told Bloomberg News. First-quarter profit fell 11 percent to 269.4 million yuan, or 2.08 yuan per American Depositary Receipt, from 301.5 million yuan, or 2.21 yuan, a year earlier, it said on Wednesday.

Its ADRs fell 9.8 percent in United States after-hours trading to US$21.70 after the release. The stock shed 0.4 percent to US$24.05 on Nasdaq before the release. The ADRs have gained 27 percent this year versus 3 percent up for Shanda Interactive Entertainment Ltd.

(Shanghai Daily May 23, 2008)