Notice on Perfecting Pre - tax Deduction Policy for R & D Expenses

Postdate: 2016-11-09

(Bureaus), State Taxation Bureau, Local Taxation Bureau, Science and Technology Department (bureau), Financial Bureau of Xinjiang Production and Construction Corps, Science and Technology Bureau of all provinces, autonomous regions, municipalities directly under the Central Government and cities under separate state planning:


In accordance with the relevant provisions of the Enterprise Income Tax Law of the People's Republic of China and its Implementing Regulations, in order to further implement the spirit of the CPC Central Committee and State Council's Opinions on Deepening Institutional and Institutional Reform to Accelerate the Implementation of Innovation-Driven Development Strategies, the Company will better encourage enterprises to carry out research and development activities (Hereinafter referred to as R & D activities) and standardize the research and development costs (hereinafter referred to as R & D expenses) plus deduction of preferential policies, the deduction of R & D expenses before tax deduction of the relevant issues are as follows:


First, R & D activities and R & D costs pooled range.


The term "R & D activities" as mentioned in this Circular refers to the systematic activities with clear objectives that are continuously carried out by enterprises for acquiring new knowledge of science and technology, creatively applying new knowledge of science and technology, or substantially improving technologies, products and services.


(1) Allow the deduction of R & D expenses.


If the intangible asset is not included in the current profit or loss, it shall be deducted from the amount of taxable income in the current year based on the deduction of 50% of the actual amount of the current year. Intangible assets, intangible assets in accordance with the cost of 150% of the pre-tax amortization. Specific R & D costs include:


1. Personnel costs.


Basic salary, basic medical insurance, unemployment insurance, work injury insurance, maternity insurance and housing accumulation fund, as well as the labor costs of the external R & D personnel of the R & D personnel directly engaged in R & D activities.


2. Direct investment costs.



3. Depreciation expense.


Depreciation charges for equipment and equipment used for R & D activities.


4. Amortization of intangible assets.


Amortization of software, patents, non-patented technologies (including licenses, know-how, design and calculation methods, etc.) for research and development activities.


5. New product design fee, new process planning fee, new drug development of clinical trial fees, exploration and development of technology on-site test fee.


6. Other related costs.


Other expenses directly related to R & D activities, such as technical library materials, translation fees, expert consultation fees, hi-tech R & D insurance premiums, search, analysis, appraisal, appraisal, appraisal, assessment, acceptance, knowledge Property rights of the application fee, registration fees, agency fees, travel, conference fees. The total amount of this fee shall not exceed 10% of the total deductible R & D expenses.


7. Other charges prescribed by the Ministry of Finance and the State Administration of Taxation.


(2) The following activities do not apply the pre-tax plus deduction policy.


1. Enterprise products (services) of the regular upgrade.


2. The direct application of a scientific research results, such as the direct use of open new processes, materials, devices, products, services or knowledge.


3. After the commercialization of enterprises to provide customers with technical support activities.


4. Duplicate or simple changes to existing products, services, technologies, materials, or processes.


5. Market research studies, efficiency surveys or management studies.


6. As an industrial (service) process links or conventional quality control, testing and analysis, maintenance and repair.


7. Studies in the social sciences, arts or humanities.


Second, the handling of special matters


1. Entrusted by an external organization or individual R & D costs incurred in accordance with the actual cost of 80% of the amount charged to the commissioning party R & D costs and calculate the additional deduction, the entrusted party shall not be additional deduction. The actual amount of commissioned external R & D expenses shall be determined in accordance with the principle of independent transaction.


If the entrusting party and the entrusted party are related, the entrusting party shall provide the entrusting party with detailed information on the expenses of the R & D project.


The deduction shall not be deducted from the expenses incurred by enterprises in commissioning overseas institutions or individuals for R & D activities.


2. Projects jointly developed by enterprises shall be calculated and deducted by the parties to the R & D expenses they actually bear.


3. In accordance with the actual situation of production, operation and scientific and technological development, the enterprise group may, in accordance with the rights and obligations, be consistent with the actual cost of R & D projects with high technical requirements and large investment amount and need to concentrate on R & D projects, and the expenses and revenue sharing shall be matched. Than the principle of rational allocation of R & D costs to determine the method of sharing among the beneficiary members of the enterprise, calculated by the relevant member enterprises plus deductions.


4. The expenses related to the creative design activities undertaken by an enterprise for the purpose of obtaining innovative, creative and breakthrough products may be deducted in accordance with the provisions of this Circular.


The design of creative design refers to multimedia software, animation game software development, digital animation, game design; housing construction design (green building evaluation standards for Samsung), landscape design; industrial design, multimedia design, animation and derivative product design , Model design and so on.


Third, accounting and management


1. The enterprise shall carry out accounting treatment on the R & D expenditure according to the requirements of the national financial and accounting system. At the same time, the R & D expenses shall be deducted according to the R & D project set up by the R & D project. Accurately, Occurrence. If a company conducts a number of R & D activities within one tax year, it shall deduct the R & D expenses according to the different R & D projects.


2. Enterprises should account for R & D expenses and production and operation costs are accounted for, accurate and reasonable collection of the cost of expenditure, the division is unclear, shall not be added deduction.


Fourth, does not apply to the pre-tax deductions policy of the industry


Tobacco manufacturing industry.


2. Accommodation and catering.


3. Wholesale and retail trade.


4. Real estate.


5. Leasing and business services.


6. Entertainment.


7. Other industries as prescribed by the Ministry of Finance and the State Administration of Taxation.


The above-mentioned industries are subject to the classification and codes of national economic sectors (GB / 4754-2011) and updated accordingly.


Fifth, management issues and collection and management requirements


1. This notice applies to the sound accounting, the implementation of audit collection and accurate collection of R & D costs of resident enterprises.


2. The actual amount of R & D expenses of each project is not accurate. If the calculation of the total amount is not accurate, the tax authority has the right to make a reasonable adjustment to the deduction or extra deduction.


3. If the tax authorities disagree with the R & D projects that are subject to the deduction of preferential treatment, the tax authorities may transfer the opinions to the administrative departments of science and technology above the city level (or above) and the technical department shall reply promptly. Enterprises to undertake provincial or ministerial level (or more) scientific research projects, as well as the previous year has been identified cross-annual R & D projects, no longer need identification.


4. If the enterprise satisfies the R & D expenses deduction conditions as stipulated in this Circular and has not enjoyed the preferential tax in time after Jan. 1, 2016, it may enjoy the retroactive process and fulfill the filing procedure for a maximum of 3 years.


5. The tax authorities shall strengthen the follow-up management of the R & D expenses plus the deduction of the preferential policies and carry out regular verification, and the annual verification shall not be less than 20%.


Sixth, the implementation time


This Circular shall enter into force as of January 1, 2016. Circular of the State Administration of Taxation on Printing and Distributing the Administrative Measures on Pre-tax Deductions for Research and Development Expenses (Guo Shui Fa [2008] No. 116) and the Circular of the Ministry of Finance, State Administration of Taxation on the Deduction of Research and Development Charges (Cai Shui [2013] No. 70) shall be annulled at the same time.


Ministry of Finance, State Administration of Taxation, Ministry of Science and Technology

November 2, 2015