On 3 May 2017, China announced measures to encourage research and development (R&D) by tech firms through favorable tax terms. Small and medium sized-enterprises (SME) in the technological sector can deduct an additional 75% of the R&D costs that occurred before paying taxes, effectively lowering their taxable income.
Tech SMEs that chose alternatively to capitalize the R&D costs as intangible assets in the current accounting period can amortize the assets at 175% of the original costs. The new tax term will be in effect from the beginning of 2017 to the end of 2019.
On May 3, the MOF also announced tax incentives for venture capital firms, allowing them to deduct a certain amount of taxable income for investing in startups. The value added tax (VAT) system will also be streamlined, with four VAT brackets reduced to three, the MOF said.