Tax benefit on Research and Development
By Victor Tu
It seems that each country is focusing on the high-tech industry, whatever is the most popular Virtual Reality (VR) or Artificial Intelligence (AI) now, it is what a country is chasing after, and China is no exception. Today we would like to walk through the basic tax rules on Research and Development (R&D) issue.
Extra 75% of the tax deductions based on current year’s R&D expenditures. For example, a manufacturing company’s R&D costs are RMB500,000 for year 2016, when it files its annual corporate income tax returns in March 2017, it could apply for RMB 875,000 [500,000*(1+75%)] deductions and earns extra tax saving RMB 93,750 (18.75%). But please note that this tax inventive only applies during January 1, 2018 to December 31, 2020 in accordance with current rule.
Scope of R&D:
l Labor costs: Salaries, Bonuses, Social Insurances, Housing Fund, outsourced labor service costs for R&D.
l Direct investment: Raw materials, Utilities, Power; Tooling, Modeling, Testing; Maintenance or Lease of Instruments and Machines for R&D.
l Depreciation of Instruments and Machines for R&D.
l Amortization of intangible assets (software, patents, know-how) for R&D.
l Design, Inspection, Exploring costs for R&D.
l Other costs: up to 10% of above 5 items total amount
Who is entitled to have this tax benefits:
For any tax residential companies who have the ability to collect and allocate the R&D costs correctly.
Keywords: Ningbo accounting, Ningbo Auditor, Ningbo accountants, Ningbo CPA
Victor & Truman，CPAs 宁波纬度会计师事务所（普通合伙）