The relevant person in charge of the State Administration of Taxation has introduced that research and development expenses plus deduction, refers to the enterprise’s research and development expenses can be deducted on the basis of the actual amount of taxable income, and then a certain proportion of deduction, the policy through positive tax incentives to encourage enterprises to increase investment in research and development.

The “Announcement” proposed that the R&D expenses actually incurred in the research and development activities of integrated circuit enterprises and industrial mother-machine enterprises, which did not form intangible assets and were included in the current profit and loss, on the basis of actual deduction in accordance with the provisions, during the period from January 1, 2023 to December 31, 2027, 120% of the actual amount will be deducted before tax; If intangible assets are formed, they shall be amortized before tax at 220% of the cost of intangible assets during the said period.

Increase the deduction amount for integrated circuit and industrial mother-machine enterprises

The policy of pre-tax deduction of research and development expenses has been implemented in China for a long time according to institutional arrangements, and enterprises in other industries can enjoy it except tobacco manufacturing, accommodation and catering, wholesale and retail, real estate, leasing and business services, and entertainment.

According to the previous provisions, the R&D expenses actually incurred in the enterprise’s R&D activities, which do not form intangible assets and are included in the current profit or loss, shall be deducted according to the actual deduction in accordance with the provisions, and then deducted according to the actual amount of 100% of the tax; If intangible assets are formed, 200% of the cost of intangible assets shall be amortized before tax.

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In recent years, the additional deduction of research and development costs has continued to increase, which has strongly stimulated the innovation vitality of enterprises. During the “13th Five-Year Plan” period, the number of enterprise households nationwide enjoying the policy of additional deduction of R&D expenses increased from 53,000 in 2015 to 339,000 in 2019, an increase of 5.4 times in five years; Tax breaks will be increased from 72.6 billion yuan to 355.2 billion yuan.

Zhang Qilong, statisticians of the Department of Social Science and Culture of the National Bureau of Statistics, pointed out that in 2022, the number of enterprises enjoying the preferential policies of tax reduction and exemption for R&D expenses and high-tech enterprises increased by 16.3% and 11.7% over the previous year, respectively, which effectively encouraged enterprises to increase investment in research and development.

Since the beginning of this year, the finance and taxation department has increased the pre-tax deduction ratio of research and development expenses of enterprises in eligible industries from 75% to 100%, which is a long-term institutional arrangement. At the same time, enterprises are allowed to enjoy the policy of additional deduction of research and development costs in advance, and the pre-payment declaration period in July of the year is added as the time point to enjoy the policy. According to statistics, in July this year, among the enterprises that have enjoyed the deduction of R&D expenses in advance, the number of private enterprises accounted for 94.3%, more than 290,000 households, and the amount of private enterprises to enjoy the deduction of R&D expenses accounted for 76.6% of the total amount.