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E-mail China.org.cn, January 29, 2024
Phoenix TV:
We understand that the Central Economic Work Conference has attached high importance to support for scientific and technological innovation. In the field of taxation, the additional tax deduction for R&D expenses plays an important role in supporting innovation. Please introduce the related policy, its implementation, and its effects. Thank you.
Huang Yun:
Thank you for your question. In 2023, China continuously upgraded its preferential tax policy and encouraged enterprises to increase their R&D investment. The full and targeted implementation of the policy delivers real benefits to enterprises through tax and fee cuts, which effectively boosts their confidence in R&D investment and injects more momentum into their innovative development. This is mainly reflected in the following three aspects:
First, the policy has been pursued with intensified efforts to increase support. In March 2023, the additional tax deduction for R&D expenses for eligible enterprises was raised from 75% to 100%, which has been implemented as a long-term institutional arrangement. Building on that, we have focused on the high-quality development of the integrated circuit and machine tool industries, where the additional tax deduction for R&D expenses has been increased to 120%. In accordance with the deployments of the State Council, the State Taxation Administration, in coordination with the Ministry of Finance, added another opportunity for enterprises to access the additional tax deduction for R&D expenses in July when they declare tax prepayment. This is in addition to the existing two periods: declaring tax prepayment in October as well as making the final settlement. This guides enterprises to receive policy dividends earlier and more promptly.
Second, policy implementation has been more targeted. The tax departments have compiled the Implementation Guidelines for the Policy of Additional Deduction of Research and Development Expenses (Version 2.0), released two batches of 20 Q&As to explain policies and strengthened training and guidance in innovative ways to facilitate taxpayer benefits from the policies. At the same time, we used taxation big data to send policy notifications in a targeted way at different times and with different emphases, took multiple measures to achieve a targeted approach in connecting policies with individuals, and helped innovative enterprises promptly benefit from the policies.
Third, the policies have gradually taken effect. Currently, the annual enterprise income tax settlement for 2023 is being carried out in an orderly manner. Based on the enterprise income tax prepayment declaration for 2023, the total amount of additional deduction for R&D expenses of enterprises reached 1.85 trillion yuan, a year-on-year increase of 13.6%. Among it, manufacturing enterprises accounted for nearly 60%, with a total amount of 1.1 trillion yuan of additional deduction. Big data in tax administration also shows that enterprises benefiting from the preferential policy of additional deduction for R&D expenses have a profit margin of 7.4%, higher than the average level of all enterprises.
Next, the tax departments will follow the arrangements and requirements of the Central Economic Work Conference and conscientiously implement preferential tax policies to support scientific and technological innovation. Efforts will be made to continuously improve the level of facilitation of policies and better support high-level self-reliance and greater strength in science and technology, as well as innovation and development of enterprises. Thanks.
