中国政府近期发布相关文件，将企业研发费用加计扣除比例提高。本篇文章为英文版政策概要，供您参考。
In order to further enhance the state’s innovation competitiveness, on 20 September 2018, the Ministry of Finance (MOF) and the State Administration of Taxation (SAT), together with the Ministry of Science and Technology jointly announced MOF/SAT Caishui [2018] No. 99 (“Circular 99”)i to increase the super deduction rate of eligible R&D expenses from 50% to 75% for all enterprises (except for those covered under the negative list as stated below). This policy is in line with the Innovation-driven Development Strategy mapped in the overarching economic development plan designed by the 18th National Congress of the Communist Party of China.
What has been changed？
According to Circular 99, From 1 January 2018 to 31 December 2020, enterprises are allowed to claim a 175% super deduction on eligible R&D expenses actually incurred in the course of R&D activities. Alternatively, if the R&D expenses incurred are capitalized as intangible assets, enterprises are allowed to amortize the intangible assets based on 175% of the actual cost incurred.
Tax implementation rules related to the administration of R&D super deduction shall still refer to relevant rules such as MOF/SAT Caishui [2015] No. 119 (“Circular 119”), MOF/SAT Caishui [2018] No. 64 (“Circular 64”) and SAT Public Notice [2015] No. 97 (“PN 97”)ii.
Qualifying activities and applicable industries – no change
According to Circular 119 issued in 2015, the R&D expenses super deduction policy applies to China tax resident enterprises that have sound financial accounting systems, pay tax on an actual profit basis and are able to accurately record and integrate R&D expenses.
“R&D activities” refer to activities with clearly defined purposes on a continuous basis and which are systematically carried out in order to derive new science/technology knowledge, including:
applying new science/ technology knowledge in an innovative manner; or improving current technologies, products/services or techniques substantiallyThe qualifying applicable scope of super deduction regime is primarily set in line with the above principle.
Excluded 7 industries and 7 activities – no change
Circular 119 provides a negative list of industries that are NOT eligible for the super deduction policy:
Circular 119 also excludes the following seven types of activities from the applicable scope of the R&D expenses super deduction regime:
Outsourcing of R&D activities – no change
Circular 64 was released in June 2018 to allow CIT super deduction for expenses incurred for outsourcing R&D activities to overseas entities (excluding overseas individuals) from 1 January 2018.
An enterprise, as consignor, is eligible for super deduction based on 80% of expenses incurred for the R&D activities outsourced to overseas entities, provided that the expenses do not exceed 2/3 of the enterprise’s total eligible R&D expenses incurred domestically.
The technology development contract for R&D outsourcing should be registered with the relevant department of science and technology (for any outsourcing agreement signed with an overseas consignee, the consignor should complete the registration formality), otherwise, super deduction shall be forbidden.
Administrative procedures and post-event tax audit – no change
Circular 64 specifies that eligible enterprises should refer to SAT Public Notice [2018] No. 23iii to claim the super deduction in the annual CIT filing, which is to say, enterprises are not required to file any documents in advance for approval. However, enterprises should keep the relevant documentation for future reference.
According to Circular 119 and PN 97, tax authorities are required to carry out follow-on inspections on a regular-basis, and the annual audit shall cover no less than 20% of the total R&D super deduction applicants that have enjoyed this benefit.
Appendix. Major economies – innovation index, global competitiveness index and GDP per capita rankings
- sourced from the World Economic Forum (WEF), the Cornell University (CORNELL), the European Institute of Business Administration (INSEAD), the World Intellectual Property Organization (WIPO), and the World Bank (WB)
