ANNOUNCEMENT 25 Jun 2018
June 25th, 2018 - The Chinese government expanded the scope of a policy allowing R&D corporate income tax to be 'super deductible'.
NUMBER OF INTERVENTIONS
PRC Ministry of Finance, June 25th, 2018. (财税〔2018〕64号 关于企业委托境外研究开发费用税前加计扣除有关政策问题的通知)
Pursuant to the executive meeting of the PRC State Council in April 2018, the Ministry of Finance released an announcement in June to implement one of the measures proposed therein. China operates a scheme which allows any R&D expenses to be 'super deducted' from corporate taxes (see related state act for details). The June 2018 announcement repeals a clause from the original 2015 policy which barred firms from claiming such deductions on R&D expenses incurred overseas. R&D services outsourced abroad were thus not eligible for the super deduction.
The June 2018 announcement retroactively (from January 1st, 2018) allows the deductions to be claimed on up to 80% of R&D expenses incurred abroad, provided that this sum does not exceed ⅔ of domestically incurred R&D expenses.
The scope of the scheme is quite broad - any expense that can be argued successfully as being 'R&D' can be claimed, as long as it is not in an industry mentioned in a 2015 'negative list' (see related state act).