Which enterprises are eligible for the R D expense deduction policy?

The Notice on Improving the Policy of Pre-tax Deduction of R&D Expenses (CS No. 119) stipulates that the policy of additional deduction of R&D expenses is applicable to resident enterprises with sound accounting, audit and collection, and accurate collection of R&D expenses. Enterprises that pay enterprise income tax in accordance with the approved collection method cannot enjoy this preferential policy.

Therefore, the policy of additional deduction of R&D expenses is applicable to all resident enterprises with sound accounting, audit collection, and accurate collection of R&D expenses, not only high-tech enterprises or innovative enterprises.

The pre-tax deduction of R&D expenses is applicable to resident enterprises with sound financial accounting and can accurately collect R&D expenses. Non-resident businesses. Enterprises that have been approved and collected, and whose financial accounting is not sound and cannot accurately collect R&D expenses.

These three types of enterprises are not eligible for additional deductions. Specifically, you can ask Zhishan Technology Service Company on the Internet, they are very professional in this regard.

Scope of application: The pre-tax deduction of R&D expenses is applicable to resident enterprises with sound financial accounting and accurate collection of R&D expenses. The following three types of enterprises are not eligible for additional deductions:

The first is non-resident enterprises.

The second is to approve the collection of enterprises.

Third, the financial accounting is not sound, and the research and development expenses cannot be accurately collected enterprises.

The R&D activities of enterprises can enjoy additional deductions. Enterprise R&D activities refer to the R&D activities with clear objectives that enterprises continue to carry out in order to obtain new knowledge of science and technology (excluding humanities and social sciences), creatively apply new knowledge of science and technology, or substantially improve technology, processes, and products (services). According to this definition, an enterprise's R&D activities should meet three conditions at the same time:

First, it is innovative and has a role in promoting the technology and technology of related industries in the region; Second, it is valuable, and the enterprise has achieved valuable results through innovation in technology, process and product (service) through R&D activities; Third, in line with the catalogue, that is, Article 4 of the State Administration of Taxation 2008 No. 116 stipulates that the R&D activities engaged in by enterprises must comply with the "High-tech Fields Supported by the State" and the "Guidelines for the Key Areas of High-tech Industrialization for Current Priority Development (2007)" issued by the national government and other departments.

1) The cost of materials, fuel and power directly consumed by R&D activities.

2) Labor expenses such as salaries, bonuses, allowances, subsidies, social insurance premiums, housing provident funds, etc., as well as labor costs of external R&D personnel.

3) Depreciation or lease costs of fixed assets such as instruments, equipment, and houses used for R&D activities, as well as the operation, maintenance, and repair costs of related fixed assets.

4) Amortization expenses of intangible assets such as software, patent rights, and non-patented technologies used for R&D activities.

5) The development and manufacturing costs of molds and process equipment for intermediate tests and product trial production, equipment adjustment and inspection fees, the purchase costs of samples, prototypes and general testing methods, and the inspection fees of trial products.

6) Demonstration, review, acceptance, evaluation of R&D results, as well as application fees, registration fees, and fees for intellectual property rights.

7) Fees paid for entrusting or cooperating with other units or individuals to conduct R&D through outsourcing, cooperative R&D, etc.

8) Other expenses directly related to R&D activities, including technical library fees, data translation fees, conference fees, travel expenses, office expenses, foreign affairs expenses, R&D personnel training fees, training fees, expert consultation fees, high-tech R&D insurance costs, etc.

2 General Principles:

Article 2 of Cai Qi [2007] No. 194 stipulates that an enterprise shall clarify the scope and standard of R&D expenses, strictly examine and approve procedures, and set up a ledger to collect and account for R&D expenses according to the R&D project or the unit undertaking the R&D task. After an enterprise obtains intellectual property rights in accordance with the law, the intellectual property maintenance fees, litigation fees, ** fees, "anti-counterfeiting" and other related expenses incurred at home and abroad shall be paid from the management expenses and shall not be included in the R&D expenses. The various expenses incurred by the R&D institution of the enterprise are included in the management of R&D expenses, but if they undertake production tasks at the same time, they should reasonably divide the R&D and production expenses.

Article 4 of Cai Qi [2007] No. 194 stipulates that an enterprise may establish a R&D reserve system, arrange funds in advance according to the R&D plan and capital needs, and ensure the need for R&D funds, and the R&D expenses shall be included in the cost (expense) according to the actual amount incurred.

Article 5 of Cai Qi [2007] No. 194 stipulates that an enterprise shall disclose the relevant financial information of R&D expenses in the annual financial accounting report, including the scale of R&D expenses and their proportion in sales revenue, and the centralized collection and payment of R&D expenses. When auditing the annual accounting statements of an enterprise, an accounting firm should pay attention to the use and management of the enterprise's R&D expenses.

3 Special Treatment:

Article 3 of Cai Qi [2007] No. 194 stipulates that for R&D projects with high technical requirements, large investment amounts, and difficult for a single enterprise to undertake independently, or where R&D strength is concentrated in the group company and the R&D activities of the group are managed as a whole, the group company may use the R&D expenses in a centralized manner within the scope of its wholly-owned and holding enterprises. In principle, the total amount of R&D expenses used by the group company shall not exceed 2% of the annual operating income of the group's consolidated accounting statements. The year-end balance after use has exceeded the total amount of the current year for three consecutive years.

What R&D expenses can be deducted?

Resident enterprises with sound accounting, audit collection, and accurate collection of R&D expenses can enjoy the policy of additional deduction of R&D expenses. Of course, there are still some industries that are not eligible for this policy, such as: tobacco manufacturing, accommodation and catering, wholesale and retail, real estate, leasing and business services, entertainment, and other industries specified by the Ministry of Finance and the State Administration of Taxation.

1. What expenses can be included in the additional deduction of R&D expenses?

According to the notice of the Ministry of Finance, the State Administration of Taxation and the Ministry of Science and Technology on improving the pre-tax deduction policy for R&D expenses, the scope of R&D expenses that can be included in the additional deduction of R&D expenses includes the following six aspects: personnel labor costs, direct input costs, depreciation expenses, amortization of intangible assets, new product design costs, new process specification formulation fees, clinical trial expenses for new drug development, field test fees for exploration and development technology, which is commonly known as three new expenses and other expenses.

It should be noted that the total amount of other expenses directly related to R&D activities shall not exceed 10% of the total amount of R&D expenses that can be deducted. The expenses incurred by the enterprise in entrusting external institutions or individuals (excluding overseas individuals) to carry out R&D activities shall be included in the R&D expenses of the entrusting party according to 80% of the actual amount of the expenses and calculated and deducted, and the entrusted party shall not make additional deductions.

2. How to enjoy the pre-tax deduction policy for R&D expenses?

In order to further encourage enterprises to increase R&D investment and support scientific and technological innovation. According to the 2018 Notice of the Ministry of Finance, the State Administration of Taxation and the Ministry of Science and Technology on Increasing the Pre-tax Deduction Ratio of R&D Expenses, the state has further increased the proportion of R&D expenses. The proportion of the 50% additional deduction for expense has been increased to 75%, and the proportion of 150% additional deduction for capitalization has been increased to 175%.

Moreover, the 2021 Announcement of the Ministry of Finance and the State Administration of Taxation on Extending the Implementation Period of Some Preferential Tax Policies indicates that the implementation of this policy will be extended to 2023.

The policy indicates that in addition to the enterprises that do not apply to the pre-tax R&D expenses (introduced above), if the R&D expenses actually incurred by other enterprises in R&D activities are not included in the current profit or loss as intangible assets, during the period from January 1, 2018 to December 31, 2023, on the basis of the actual deduction according to the regulations, 75% of the actual amount will be deducted before tax. Intangible assets are formed and amortized before tax at 175% of the cost of intangible assets during the above period.

Legal basis

Notice of the Ministry of Finance, the State Administration of Taxation and the Ministry of Science and Technology on Increasing the Pre-tax Deduction Ratio of R&D Expenses of Small and Medium-sized Science and Technology Enterprises, which clearly points out that if the R&D expenses actually incurred by small and medium-sized science and technology enterprises in R&D activities are not included in the current profit or loss as intangible assets, they will be deducted before tax according to 75% of the actual amount from January 1, 2017 to December 31, 2019 on the basis of deduction according to the regulations; If an intangible asset is formed, it shall be amortized before tax at 175% of the cost of the intangible asset during the above-mentioned period.

No, it is still to restrict the six major industries (see the policy basis 2), but it is necessary to pay attention to the enjoyment and at the same time require sound accounting. Policy Basis:

1) Notice on Increasing the Pre-tax Deduction Ratio of R&D Expenses (CS 2018 No. 99):

1. If the R&D expenses actually incurred by the enterprise in R&D activities are not included in the current profit or loss as intangible assets, on the basis of deduction according to the regulations, 75% of the actual amount will be deducted before tax during the period from January 1, 2018 to December 31, 2020; If intangible assets are formed, 175% of the cost of intangible assets shall be amortized before tax during the above period.

2. Other policy standards and management requirements for enterprises to enjoy the pre-tax additional deduction policy for R&D expenses shall be in accordance with the Notice of the Ministry of Finance, the State Administration of Taxation and the Ministry of Science and Technology on Improving the Pre-tax Deduction Policy for R&D Expenses (CS 2015 No. 119), the Notice of the Ministry of Finance and the Ministry of Science and Technology of the State Administration of Taxation on Policy Issues Concerning the Pre-tax Additional Deduction of Overseas R&D Expenses Entrusted by Enterprises (CS 2018 No. 64), The announcement of the State Administration of Taxation on issues related to the policy of pre-tax deduction of enterprise research and development expenses (Announcement No. 97 of 2015 of the State Administration of Taxation) and other documents shall be implemented.

2) Basis for restricting industries: Notice of the Ministry of Finance and the Ministry of Science and Technology of the State Administration of Taxation on Improving the Policy of Pre-tax Deduction of R&D Expenses (CS 2015 No. 119):

4. Industries that do not apply to the pre-tax additional deduction policy:

1. Tobacco manufacturing.

2. Accommodation and catering.

3. Wholesale and retail trade.

4. Real estate.

5. The leasing and business services industry is closed.

6. Entertainment industry. 7. The Ministry of Finance and the State Administration of Taxation stipulate its sedan myeongdong and other industries.

Enterprises whose main business is in the following industries are not eligible for additional deductions:

1. Tobacco manufacturing.

2. Accommodation and catering.

3. Wholesale and retail trade.

4. Real estate.

5. Leasing and business services.

6. Entertainment industry.

The following three types of enterprises are not eligible for additional deductions:

1. Non-resident enterprises.

2. Approved collection enterprises.

3. The financial accounting is not sound Li Buming, and the enterprise and forest industry cannot accurately collect the R&D and development expenses.