The Ministry of Finance of China on 30 September 2013, released a circular which expands the criteria for enterprises to be eligible to claim the extra 50 percent tax deduction on expenses incurred from research and development.
The super tax deduction on R&D expenses (which is retroactively in effect from 1 January 2013) will be available to enterprises that incur the following expenses:
- companies incurring expenses from paying current R&D employees basic retirement insurance, basic medical insurance, unemployment insurance, work-related injury insurance, maternity insurance, and housing funds. Eligibility will be determined in accordance with the scope and standards set by the competent department of the State Council (executive branch) or by the relevant provincial-level government;
- expenses which are incurred from the operational maintenance, adjustment, testing, and repair of apparatus and equipment used for R&D activities;
- expenses incurred from purchasing samples and prototypes that do not constitute fixed assets and payments for general testing;
- expenses from clinical trials for R&D in respect of new drugs; and
- expenses that are incurred for the verification and appraisal of R&D results.
If the tax authority has any doubts about the validity of an R&D project that has been submitted by a taxpayer, it may request the company to submit an opinion letter issued by the government department in charge of science and technology.
