October 24 2022

Corporate Investments in Basic Research Eligible for Pre-tax Full Deduction and Additional Deduction

Source: Announcement of the State Taxation Administration

The State Council introduced three phased tax reduction policies to support corporate innovation at the executive meeting held on September 7, 2022. The Ministry of Finance ("MOF") and other two authorities clarified two of the policies in their No.28 (2022) Announcement. The MOF and the State Taxation Administration ("STA") jointly released on October 8, 2022 the supporting document for the third policy.

According to the Announcement of the Ministry of Finance and the State Taxation Administration on the Preferential Tax Policy for Corporate Investment in Basic Research, corporate investments in non-profit scientific and technological R&D institutions, colleges and universities, and government natural science funds for basic research are eligible for pre-tax deduction of the actually incurred amount in the calculation of the taxable income, as well as 100 percent pre-tax additional deduction. The income of non-profit scientific research institutions, and colleges and universities from basic research funds received from enterprises, individuals and other organizations will be exempted from the enterprise income tax.