April 21 2021

MOF and STA Releases Policy Document on Additional Deductions of R&D Expenses for Manufacturing Firms

Announcement by Ministry of Finance (MOF)and the State Administration of Taxation (SAT)

The Ministry of Finance and the State Administration of Taxation jointly released on April 7, 2021 the Announcement on Further Improving the Policy for Pre-tax Additional Deductions of R&D Expenses, with retroactive effect from January 1, 2021.

According to the Announcement, for any actual R&D expenses incurred by manufacturing firms, if they have not formed intangible assets and have not been included in the current profits and losses, such expenses can be additionally deducted before tax according to 100% of the actual amount on the basis of actual deductions starting from January 1, 2021; in the case they have formed intangible assets, they shall be amortized before tax at 200% of the cost of intangible assets. When an enterprise declares the enterprise income tax for the third quarter (paid quarterly) or for the month of September (paid monthly) of the current year in advance, it can choose to enjoy the preferential policy for additional deductions of the R&D expenses incurred in the first half of the current year.