Tax benefit on Research and Development

By Victor Tu


It seems that each country is focusing on the high-tech industry, whatever is the most popular Virtual Reality (VR) or Artificial Intelligence (AI) now, it is what a country is chasing after, and China is no exception. Today we would like to walk through the basic tax rules on Research and Development (R&D) issue.


Tax benefit:

Extra 75% of the tax deductions based on current year’s R&D expenditures. For example, a manufacturing company’s R&D costs are RMB500,000 for year 2016, when it files its annual corporate income tax returns in March 2017, it could apply for RMB 875,000 [500,000*(1+75%)] deductions and earns extra tax saving RMB 93,750 (18.75%). But please note that this tax inventive only applies during January 1, 2018 to December 31, 2020 in accordance with current rule.


Scope of R&D:

l  Labor costs: Salaries, Bonuses, Social Insurances, Housing Fund, outsourced labor service costs for R&D.

l  Direct investment: Raw materials, Utilities, Power; Tooling, Modeling, Testing; Maintenance or Lease of Instruments and Machines for R&D.

l  Depreciation of Instruments and Machines for R&D.

l  Amortization of intangible assets (software, patents, know-how) for R&D.

l  Design, Inspection, Exploring costs for R&D.

l  Other costs: up to 10% of above 5 items total amount


Who is entitled to have this tax benefits:

For any tax residential companies who have the ability to collect and allocate the R&D costs correctly.  

Keywords: Ningbo accounting, Ningbo Auditor, Ningbo accountants, Ningbo CPA



Victor & Truman,CPAs  宁波纬度会计师事务所(普通合伙)