China.org.cn | November 11, 2024
Shou Xiaoli:
The last question, please.
Xinhua:
China has introduced many preferential tax policies to support innovation, among which a policy for additional deduction to R&D expenses has attracted wide attention. Could you brief us on this?
Rao Lixin:
Mr. Huang will answer this question.
Huang Yun:
Thank you for your question. In recent years, China has introduced a series of preferential tax policies to support scientific and technological innovation, such as the additional deduction for R&D expenses and preferential income tax policies for high-tech enterprises. Among them, the R&D expense deduction offers broad coverages, significant impact and high value, effectively enhancing enterprises' role as the main drivers of innovation. To make this easier to understand, let me give a simple example. If a company engages in R&D activities and incurs eligible R&D expenses of one million yuan, and if the 100% additional deduction policy applies, the company can deduct two million yuan in R&D costs before calculating its income tax. Simply put, for every one yuan spent, the company can deduct two yuan in costs. This approach significantly reduces the company's taxable income and, consequently, the tax payable. By reinvesting the tax savings into R&D, companies create a positive cycle that promotes innovation.
In order to further advance innovation-driven development and encourage enterprises to increase their investment in R&D, the policy for additional R&D expense deductions has been continuously strengthened in recent years. This has boosted companies' confidence, enhanced their determination and injected fresh momentum into technological innovation. It is mainly reflected in three aspects:
First, the additional deduction rate has been continuously raised. Starting in 2017, the R&D expense deduction was raised from 50% to 75% in phases across various industries. It was then further increased to 100%, with a 120% deduction now available for R&D expenses in key areas, such as integrated circuits and industrial mother machines.
Second, the timing for benefiting from the policy has been advanced several times. Initially, the additional deduction could only be claimed during the annual corporate income tax settlement. This was extended to the October prepayment declaration and then the July prepayment period. This allows enterprises to access policy benefits earlier, providing greater cash flow to increase their R&D investments.
Third, efforts have been made to continually improve the precision of policy implementation. Tax departments have carefully conducted policy promotion and guidance, providing targeted information. The Implementation Guidelines for the Policy of Additional Deduction of Research and Development Expenses was compiled and published, with timely updates and improvements. They have also issued case studies to address challenging issues in identifying R&D activities and policy application, further clarifying and standardizing implementation standards. These efforts help enterprises benefit from the policy more accurately and promptly.
According to data from the 2023 annual corporate income tax settlement that concluded in the first half of this year, a total of 629,000 enterprises across the country benefited from additional R&D expense deductions amounting to 3.45 trillion yuan. This policy has injected new momentum into accelerating the development of new quality productive forces. On the one hand, it has strongly supported the innovative development of high-tech enterprises. In 2023, 405,000 high-tech enterprises received additional deductions totaling 2.83 trillion yuan, a year-on-year increase of 15.1%. The average deduction per company is 2.5 times that of enterprises that are not classified as high-tech. On the other hand, it has significantly supported the innovation and development of private enterprises. In 2023, private enterprises received additional deductions totaling 2.59 trillion yuan, a year-on-year increase of 12.5%, accounting for 75% of all additional deductions across enterprises.
Next, the tax department will thoroughly implement the spirit of the third plenary session of the 20th CPC Central Committee. We will further enforce tax policies, such as the additional deduction for R&D expense, to support technological innovation. Our goal is to fully support the innovation and development of various enterprises and to better nurture and expand new quality productive forces. Thank you.
Shou Xiaoli:
Thank you, Mr. Rao, and all our speakers. Thanks to all journalists for joining us. That's all for today's briefing. Goodbye, everyone.
Translated and edited by Zhang Rui, Zhou Jing, Yang Chuanli, Ma Yujia, Liu Sitong, Wang Wei, Xu Kailin, Liu Jianing, Zhang Tingting, Li Huiru, Yan Xiaoqing, Liu Qiang, Rochelle Beiersdorfer, and Jay Birbeck. In case of any discrepancy between the English and Chinese texts, the Chinese version is deemed to prevail.