What R D expenses incurred in R D activities of enterprises are allowed to be deducted?

What R&D expenses can be deducted?

Learn accounting practice and professional title courses with the CPA system, from theory to practice, from zero foundation to financial director, and enhance your value!

According to the Ministry of Finance, the State Administration of Taxation and the Ministry of Science and Technology jointly issued on November 2, 2015, Cai Shui [2015] No. 119: "Improving the Policy of Pre-tax Deduction of Research and Development Expenses".

The R&D activities mentioned in this notice refer to the systematic activities with clear objectives that enterprises continue to carry out in order to obtain new scientific and technological knowledge, creatively apply new scientific and technological knowledge, or substantially improve technologies, products (services) and processes.

If the R&D expenses actually incurred by the enterprise in carrying out R&D activities are not included in the profit or loss of the current period as intangible assets, they shall be deducted from the taxable income of the current year according to 50% of the actual amount incurred in the current year on the basis of deduction according to the regulations; If an intangible asset is formed, it shall be amortized before tax at 150% of the cost of the intangible asset. The specific scope of allowable R&D expenses includes:

1.Personnel labor costs.

Wages and salaries, basic pension insurance premiums, basic medical insurance premiums, unemployment insurance premiums, work-related injury insurance premiums, maternity insurance premiums and housing provident fund premiums for personnel directly engaged in R&D activities, as well as labor expenses for external R&D personnel.

2.Direct input costs.

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

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

3) Expenses for the operation and maintenance, adjustment, inspection and repair of instruments and equipment used for R&D activities, as well as the rental fees for instruments and equipment leased for R&D activities through operating leases.

3.Depreciation expense.

Depreciation of instruments and equipment used for R&D activities.

4.Amortization of intangible assets.

Amortization expense of software, patent rights, and non-patented technology (including licenses, know-how, designs, and calculation methods) used for R&D activities.

5.New product design fees, new process specification formulation fees, new drug development clinical trial fees, exploration and development technology field test fees.

6.Other related fees.

Other expenses directly related to R&D activities, such as technical library fees, data translation fees, expert consultation fees, high-tech R&D insurance premiums, R&D results retrieval, analysis, evaluation, demonstration, appraisal, review, evaluation, acceptance fees, intellectual property application fees, registration fees, ** fees, travel expenses, conference fees, etc. The total amount of this expense shall not exceed 10% of the total amount of R&D expenses that can be deducted.

7.Other fees as prescribed by the Ministry of Finance and the State Administration of Taxation.

According to the Ministry of Finance.

The Ministry of Science and Technology of the State Administration of Taxation has increased the pre-tax deduction of research and development expenses.

Notice on the proportion (Cai Shui 2018 No. 99), the R&D expenses actually incurred by the enterprise in carrying out R&D activities.

No intangible assets are formed.

If it is included in the current profit or loss, on the basis of deduction according to the regulations, during the period from January 1, 2018 to December 31, 2020, 75% of the actual amount will be deducted before tax;

In the case of intangible assets, 175% of the cost of intangible assets shall be amortized before tax during the above-mentioned period.

According to the Announcement of the State Administration of Taxation of the Ministry of Finance on Extending the Implementation Period of Some Preferential Tax Policies (Announcement No. 6 [2021] of the State Administration of Taxation of the Ministry of Finance), the implementation period of the preferential tax policies stipulated in this article has expired to December 31, 2023.

According to the announcement of the State Administration of Taxation of the Ministry of Finance on further improving the policy of pre-tax deduction of R&D expenses (Announcement No. 13 of 2021 of the State Administration of Taxation of the Ministry of Finance), if the R&D expenses actually incurred by manufacturing enterprises 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, from January 1, 2021, 100% of the actual amount will be deducted before tax;

If intangible assets are formed, they will be amortized before tax at 200% of the cost of intangible assets from January 1, 2021. Rotten.

According to the Ministry of Finance, the State Administration of Taxation and the Ministry of Science and Technology on further improving technology-based small and medium-sized enterprises.

Announcement on the pre-tax deduction ratio of R&D expenses (Announcement No. 16 of 2022 of the Ministry of Science and Technology of the State Administration of Taxation of the Ministry of Finance), if the R&D expenses actually incurred by small and medium-sized technology-based enterprises 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, from January 1, 2022, 100% of the actual amount will be deducted before tax;

If intangible assets are formed, 200% of the cost of intangible assets will be amortized before tax from January 1, 2022.

The executive meeting held on March 24.

It was decided to increase the pre-tax deduction ratio of R&D expenses of enterprises in eligible industries from 75% to 100% for long-term implementation as an institutional arrangement. In order to further encourage enterprises to increase R&D investment and better support scientific and technological innovation, the Ministry of Finance and the State Administration of Taxation recently jointly issued the "Announcement on Further Improving the Pre-tax Deduction Policy for R&D Expenses".

Announcement No. 7 of 2023 of the Ministry of Finance and the State Administration of Taxation), clarifying issues related to the pre-tax additional deduction policy for R&D expenses.

Today, I will take you to understand: the scope of activities applicable to the R&D expense plus deduction policy.

Applicable entities] Enterprises in other industries can enjoy the benefits except for tobacco manufacturing, accommodation and catering, wholesale and retail, real estate, leasing and business services, entertainment, etc.

Applicable activities] Systematic activities with clear objectives that enterprises continue to carry out in order to obtain new knowledge of science and technology, creatively apply new knowledge of science and technology, or substantially improve technology, products (services), and processes. The following activities are not eligible for pre-tax deductions:

1.Routine upgrades of enterprise products (services).

2.The direct application of a scientific research achievement, such as the direct use of a disclosed new process, material, device, product, service or knowledge.

3.The technical support provided by the company to customers after commercialization is carried out in Jinchang activities.

4.Repetitive or simple changes to existing products, services, technologies, materials, or processes.

5.Market research, efficiency surveys or management studies.

6.As an industrial (service) process link or routine quality control, testing and analysis, repair and maintenance.

7.Studies in the social sciences, arts, or humanities.

Policy basis] 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 research and development expenses.

Cai Shui 2015 No. 119).