ANNOUNCEMENT 10 Dec 2008
December 10th, 2008 - China's State Administration of Taxation released a pilot programme, which let certain firms apply for large deductions to their pre-tax expenses.
NUMBER OF INTERVENTIONS
PRC State Administration of Taxation, December 10th 2008. (国税发〔2008〕116号—关于印发《企业研究开发费用税前扣除管理办法（试行）》的通知)
PRC Ministry of Finance, September 29th 2013. (财税70号—关于研究开发费用税前加计扣除有关政策问题的通知)
On the 10 December 2008, the PRC State Administration of Taxation announced a plan to provide benefits to certain R&D firms by allowing 'super-deductions' of 150% to certain pre-tax expenses.
To qualify for the scheme, the announcement states that firms must be carrying out R&D activities with clearly-defined purposes on a continuous basis and systematically carried out in order to come up with new scientific/technical knowledge, including:
The firm must also fall into one of the specified industry types on one of two 2007 lists of 'prioritised high technology' industries.
If a firm can successfully be classified as carrying out 'R&D activities' based on the above criteria, then it can claim 150% of the value for the following types of expenses as an income taxes deduction:
According to several sources, the implementation of the super-deductions was very location-specific, with local authorities granting or disallowing deductions based on their own interpretation of the criteria.
The policy came into effect retroactively from the start of 2008.
UPDATE: In September 2013, the definitions were laid out more specifically in Caishui 2013/70, which confirmed that the following types of expenses will be eligible:
Previously, the list was less well-defined and led to local tax authorities interpreting it in different ways, and denying deductions for firms when they should indeed have received them. This new announcement is intended to rectify this.
In 2015, some of the definitions were rewritten. Please see related state acts for more information.