- Scope of application of the weighted pre-tax deduction of the R&D expenses
Favorable industries: Enterprises except tobacco manufacturing, accommodation and catering, wholesale and retail, real estate, leasing and business services, and entertainment.
Continuous systematic activities with clear goals to obtain new knowledge of science and technology, make creative use of new science and technology, or substantially improve technology, product (service) and skill.
- Enterprises besides manufacturing industry, with the 75% weighted pre-tax deduction of the R&D expenses
Favorable industries: Enterprises except manufacturing, tobacco manufacturing, accommodation and catering, wholesale and retail, real estate, leasing and business services, and entertainment.
If the actual R&D expenses do not form the intangible assets included in the current profit and loss, they could be 75% weighted deducted before tax under the actual amount before December 31st, 2023. For those expenses that form the intangible assets, they shall be amortized before tax at 175% of the cost of intangible assets during the period upon.
- Raise the portion of weighted pre-tax deduction of the R&D expenses for manufacturing enterprises to 100%
If the actual R&D expenses of the manufacturing enterprise do not form the intangible assets included in the current profit and loss, they could be 100% weighted deducted before tax under the actual amount before January 1st, 2021. For those expenses that form the intangible assets, they shall be amortized before tax at 200% of the cost of intangible assets during the period upon.
- Determination for whether the enterprise with multiple industry fields shall belong to manufacturing industry
Favorable scope: Enterprises with the incomes in both manufacturing industry and other business.
Enterprise with manufacturing as the main business and the portion of main business income in the favorable time period from the total income is higher than 50%, it shall be determined as a manufacturing enterprise. If the upon portion is lower than 50%, it shall be determined as “other enterprise”.
- Previous benefit for weighted pre-tax deduction of the R&D expenses of the first half year
Favorable industries: Enterprises except tobacco manufacturing, accommodation and catering, wholesale and retail, real estate, leasing and business services, and entertainment.
From January 1st, 2021, enterprise could freely choose the weighted pre-tax deduction of the R&D expenses of the first half year when the enterprise reports and pays the business income tax of the third quarter (paid as quarter) or September (paid as month) of the year in advance in October. Also, the enterprise may choose to drop this benefit policy and apply the policy during the final settlement in the following year in October.
If you want to read the complete article, you can refer to the below link (in Chinese only): http://www.shanghaiinvest.com/cn/viewfile.php?id=16217
If you have any question, please contact me.
Mr. Mike Chang (Partner)
TEL: 0086-21-68868321
Email: mikechang@shanghaiinvest.com