March 2023 / China

On March 21 and 22, Chinese Premier Li Qiang conducted research and presided over a forum on the development of advanced manufacturing industry in Hunan Province.

He stressed the need to keep the focus of economic development on the real economy, vigorously develop advanced manufacturing, promote high-end manufacturing, and speed up the construction of a modern industrial system.

At the symposium on the development of advanced manufacturing industry, leaders of eight enterprises from all over the country talked about the situation and suggestions. Li Qiang pointed out that we cannot waver in our determination to stick to the manufacturing industry, and efforts to strengthen the manufacturing industry must be intensified. We should focus on making the manufacturing sector high-end, smart, and green, strengthen strategic planning, promote self-reliance in high-level science and technology, and upgrade traditional manufacturing and foster the development of strategic emerging industries.

On March 17, the National Development and Reform Commission and the State Administration for Market Regulation jointly issued a Notice on Further Strengthening the updating, Upgrading, application and implementation of energy conservation Standards, calling for more comprehensive policy support.

According to the Circular, the energy efficiency of major products in the industry is generally better than the advanced value of the mandatory energy consumption quota standard or the energy efficiency of major energy-using products and equipment is generally better than the level 1 of the mandatory energy efficiency standard, and priority will be included in the Green Industry Guidance Catalog and the Green Technology Promotion Catalog.

We will improve the government's green procurement policy and increase support for government procurement of energy-efficient products that meet policy requirements. We will implement favorable tax policies for environmental protection, energy and water conservation, and comprehensive utilization of resources. We will actively develop green finance, increase financial support for projects that meet higher energy efficiency levels, and support eligible enterprises to issue bonds for financing.

Recently, Hangzhou Science and Technology Bureau is soliciting public comments on the Implementation Rules of Hangzhou Enterprise R&D Expenditure Financial Subsidies (Draft for Comments). Feedback will be given until April 12, 2023.

"Implementation Rules" is a continuation of "Hangzhou Technology enterprises Research and development expenses investment financial subsidy fund Management Measures". All kinds of national, provincial and municipal technology-based small and medium-sized (micro) enterprises, high and new technology enterprises, and municipal headquarters enterprises that are registered in Hangzhou according to law and certified as valid by the state, provincial and municipal departments of science and technology can enjoy financial subsidies according to the Implementation Rules. The financial subsidies for enterprises' R&D expenses shall take the form of after-the-fact subsidies. On the basis of fully implementing the policy of pre-tax additional deduction of enterprise R&D expenses, enterprises whose R&D input is larger than that of the previous year will be granted a subsidy of up to 2 million yuan, no more than 20% of the incremental part of R&D input. The detailed rules also specify that the key targets of financial subsidies for R&D expenses of enterprises include small and medium-sized scientific and technological enterprises, high-tech enterprises and municipal headquarters enterprises.

According to the website of the Ministry of Commerce on March 16, 17 departments including the Ministry of Commerce jointly issued a circular on Serving the Construction of New development pattern and Promoting high-quality development of border (cross-border) economic cooperation zones, proposing 15 measures.

The circular calls for strengthening work guidance on the construction of comprehensive bonded zones in border (cross-border) economic cooperation zones, supporting the orderly construction of bonded warehouses and other bonded supervision sites, and guiding related regions to do a good job in the trials of general VAT taxpayer qualification. In terms of factor supply, the Circular requires the coordination of all kinds of financial resources to support and increase the intensity of financial support.

We will make full use of existing funds and investment channels such as the Special Fund for foreign economic and trade development to guide and support the high-quality development of border (cross-border) economic cooperation zones. We will support banks in conducting cross-border two-way renminbi loans. We will increase support for primary loans and credit loans to small and micro businesses in accordance with regulations, and reasonably determine interest rates and fee rates.

The Ministry of Education, together with the Ministry of Finance and other departments, issued interim measures on financial management of off-campus training institutions, which will take effect on March 14, 2023, according to the Ministry's website on March 24.

The Measures shall apply to the financial management activities of out-of-school training institutions that provide out-of-school training to preschool children and primary and middle school students aged 3 to 6, including the financial management system, fund operation, financial supervision and other nine chapters and 34 articles.

In terms of fund supervision, the Measures require that institutions shall issue invoices in accordance with regulations when collecting training service fees, and shall not fill out contents inconsistent with the actual transaction, shall not issue payment vouchers by the organizer or other names, and shall not replace payment vouchers with receipt receipts and other "ious". The training service fee collected in advance by the institution shall be managed as liabilities according to regulations, and subsequently recognized as income according to regulations. It is strictly prohibited to recognize income in advance or delay.

Five departments including the National Development and Reform Commission ("NDRC"), the Ministry of Industry and Information Technology ("MIIT") and the Ministry of Finance ("MOF") released on March 22, 2023 the Circular on Calling for Effective Work in the Preparation of the List of Integrated Circuit Enterprises, Integrated Circuit Projects and Software Enterprises That Are Eligible for the Preferential Tax Policies in 2023.

The circular makes clear that the formulation of the list of integrated circuit enterprises or projects and software enterprises that will enjoy preferential tax policies in 2023 will be extended to the formulation process of the list in 2022, and the conditions and project standards of enterprises that will enjoy preferential tax policies. If the enterprises listed in 2022 need to enjoy the New Year's preferential tax policies (except the installment tax policy of import value-added tax), they need to declare again in 2023. The enterprise shall be responsible for the authenticity of the materials and data provided. The Notice applies to the preferential policies of enterprise income tax in 2022 and the import tax policies stipulated in Document 4 of Finance Tariff (2021).

On March 20, the website of the Ministry of Finance released the Report on the Implementation of China's Fiscal Policies in 2022, which included six aspects in the fiscal policy outlook.

It proposed to improve the tax support policy, to ease the difficulties of enterprises. Taking into account fiscal affordability and the need to help enterprises with bailouts, we will, on the basis of implementing policies introduced earlier, further improve tax and fee cuts in light of actual conditions, make them more precise and targeted, give priority to supporting micro, small and medium-sized enterprises, individual industrial and commercial households, and industries in acute poverty, promote the transformation and upgrading of enterprises, enhance their innovation capacity, and add vitality and impetus to enterprises. The report also calls for deepening the reform of the fiscal and taxation systems and upgrading the modernization of fiscal management. Improve the tax system. We will strengthen the management of state assets and capital, strengthen accounting management, and comprehensively modernize financial management.

From 1 January 2023, the special deduction for research and development (R&D) activities conducted by enterprises, which can be claimed in addition to actual expenses, is 100% of the expenses incurred if the R&D activities have not created an intangible asset. Where the R&D activities have resulted in an intangible asset, the amortization base of that intangible will be 200% of the cost incurred. This is promulgated by the Announcement of the Ministry of Finance (MoF) and the State Taxation Administration (STA) [2023] No. 7 following the decision of the State Council under the leadership of the new Chinese premier Qiang Li.

The super-deduction is not new, however, the new Announcement applies to all enterprises regardless of the size of the enterprises (small or large) and sets no expiration date.

In respect of the requirements for eligibility and details regarding the implementation of the super-deduction, Circular of the Ministry of Finance (MoF) and the State Taxation Administration (STA) [2015] No. 119 and Circular of the MoF and the STA [2018] No. 64 continue to apply.