ANNOUNCEMENT 03 Nov 2015

November 3rd, 2015 - Three Chinese ministries announced proposals for expanding the range of R&D firms eligible for 'super-deductions' would be officially implemented.

NUMBER OF INTERVENTIONS

3

  • 2 harmful
  • 0 neutral
  • 1 liberalising

SOURCE

PRC State Administration of Taxation, November 3rd 2015. (财税[2015]119号—关于完善研究开发费用税前加计扣除政策的通知)
http://szs.mof.gov.cn/zhengwuxinxi/zhengcefabu/201511/t20151103_1540087.html

Inception date: 01 Jan 2016 | Removal date: open ended

Tax or social insurance relief

On the 3 November 2015, three Chinese ministries announced in Caishui 119/2015 that official implementation of a plan to widen the range of R&D firms eligible for 150% 'super-deductions' on eligible expenses.

Eligible industries are defined as firms which carry out continuous activities towards furthering the fields of science and technology. Previously, only industries mentioned in two 2007 lists of prioritised industries were eligible for the reductions.

From 2016 onwards, any firm that can convincingly argue that it satisfies the above conditions can potentially benefit, except those specified on a negative list of 7 industries. The change from a positive to a negative list increased the sectoral coverage of this scheme by the sectors stated in the taxonomy of this intervention. Please see related state acts for information on the sectors which have already been included on the positive list and remain eligible under the new regime.

Regarding the types of expenses that can be claimed back, this policy adds a few new categories:

  • Service fees for external R&D personnel;
  • Inspection fees for experimental products;
  • Expert consultation fees;
  • Insurance premiums on R&D of novel high technology;
  • Expenditure on research, analysis, review etc. of R&D results;
  • Application, registration and agency fees for intellectual property;
  • Travel and meeting expenses, etc.

The scheme is only open to Chinese firms.

AFFECTED PRODUCTS

 
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Inception date: 01 Jan 2016 | Removal date: open ended

Tax or social insurance relief

Caishui 119/2015 of November 2015 established a negative list of sectors which are not eligible for 150% 'super-deductions' on eligible R&D expenses.

From 2016 onwards, any firm that can convincingly argue that it satisfies the above conditions can potentially benefit, except those who are in the following seven industries, included on a new 'negative list':

  • Tobacco;
  • Accommodation and catering;
  • Wholesale and retail;
  • Real estate;
  • Leasing and commercial service;
  • Entertainment;
  • Any other industry specifically forbidden by the Ministry of Finance of State Administration of Taxation.

Prior to the change, only entertainment services were eligible for the super deductions. The tax relief has thus been repealed for the entertainment sectors.

 

 
N/A
Inception date: 01 Jan 2016 | Removal date: 31 Dec 2017

Localisation incentive

In the PRC Ministry of Finance's Caishui 119/2015, as well as laying out the framework of a 'super-deduction' scheme for R&D expenses (please see other interventions for more information), the announcement also introduced a restriction: that only expenses incurred through operations within China were eligible for the deductions.

Internationally outsourced R&D expenses were specifically barred from inclusion in the programme. This was changed in an announcement in 2018; please see related act for more information.

 
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