China continues to emphasise innovation-driven development, providing substantial tax incentives to promote research and development (R&D) activities. Among these, the super deduction for R&D expenses stands out as a powerful tool for businesses seeking to optimise their tax liabilities while fostering innovation.
Key Details of the Super Deduction
Under the current policy:
Companies can deduct 200% of their R&D expenses from taxable income for activities that do not create intangible assets but are expensed during the financial year.
For R&D activities that result in intangible assets, 150% of the expenses can be amortised.
This policy is available to most industries, excluding sectors on the negative list, which typically includes real estate, financial services, and certain entertainment businesses.
Application Process
Eligible companies should:
Prepare accurate and detailed records of their R&D activities, ensuring they meet the criteria set by tax authorities.
Submit their applications for the deductions during their quarterly or annual tax filings.
Engage with local tax bureaus for clarification or support if needed.
Updates and Timing
The policy was made permanent earlier this year to ensure long-term support for innovation. The current round of applications for expenses incurred between Q1 and Q3 must be submitted before the end of October to qualify for the deduction for 2023.
Strategic Benefits for Companies
This deduction directly reduces a company's tax burden, providing more resources to reinvest in innovation. By encouraging R&D, the government aims to enhance competitiveness in sectors such as advanced manufacturing, life sciences, and information technology. Furthermore, businesses operating in these encouraged industries can also combine this benefit with other tax incentives, amplifying savings.
Woodburn Accountants & Advisors is one of China’s most trusted business setup advisory firms.
Woodburn Accountants & Advisors is specialized in inbound investment to China and Hong Kong. We focus on eliminating the complexities of corporate services and compliance administration. We help clients with services ranging from trademark registration and company incorporation to the full outsourcing solution for accounting, tax, and human resource services. Our advisory services can be tailor-made based on the companies’ objectives, goals and needs which vary depending on the stage they are at on their journey.
Talk to an expert
Schedule a 30-mins complimentary, no-obligation call to see how Woodburn can help you. Book a call with our Head of Business Advisory - Kristina Koehler-Coluccia.
Topics we can advise on include:
Company Registration
Cloud Accounting & Financial Reporting
Cloud Payroll Services
Tax & Audit Services
Recruitment
Employer-of-Record
Visa Application
Trademark Registration
Switch to Woodburn
Partner with Woodburn (cross referral)
Our calls are automatically scheduled via Zoom - or via Teams, WeChat or WhatsApp upon direct request.
Our advisory calls are available from Monday-Friday from 8am to 5pm CEST and Wednesday until 9pm CEST.