Journalism

Can all manufacturing enterprises enjoy the additional deduction of R & D expenses?

2021-05-21

Recently, the Ministry of Finance and the State Administration of Taxation issued the announcement on further improving the policy of pre tax deduction of R & D expenses (Announcement No. 3, 2021) of the State Administration of Taxation of the Ministry of finance to increase the preferential intensity of R & D expenses for manufacturing enterprises. It is clear that from January 1, 2021, the proportion of additional deduction of R & D expenses of manufacturing enterprises will be increased from 75% to encourage enterprises to innovate and promote industrial upgrading.


one

Policy points


If the R & D expenses actually incurred in R & D activities of manufacturing enterprises do not form intangible assets and are included in the current profits and losses, they shall be deducted before tax according to the actual amount on the basis of deduction according to regulations from January 1, 2021;If intangible assets are formed, they shall be amortized before tax at 200% of the cost of intangible assets from January 1, 2021.


two

Are all manufacturing enterprises

R & D expenses incurred

Can all be added and deducted on a pro rata basis?


According to the No. 13 notice of the Ministry of finance, the State Administration of Taxation and the Ministry of science and technology of the State Administration of Taxation on improving the policy of pre tax deduction of R & D expenses (CS [2015] No. 119), andThe notice of the Ministry of finance, the State Administration of Taxation and the Ministry of science and technology on relevant policy issues concerning pre tax deduction of overseas R & D expenses entrusted by enterprises (CS [2018] No. 64) and other documents shall be implemented. Not all manufacturing enterprises can enjoy additional deduction, For example, the tobacco industry belongs to the negative list industry, so the policy of R & D expenses plus deduction cannot be applied.

three

How to define the scope of manufacturing industry? 


According to the announcement of the Ministry of Finance and the State Administration of Taxation on further improving the pre Tax Deduction Policy for R & D expenses (No. 3, 2021), The manufacturing industry is determined according to the classification of national economic sectors (GB / T 4574-2017).


The industrial scope of manufacturing industry is divided in the industrial classification of national economy (GB / T 4574-2017), Enterprises can query according to the specific business they are engaged in.During the implementation of this preferential policy, if the relevant departments of the state update the classification of national economic sectors, they shall comply with its provisions.


four

Answers to hot questions


1. Can R & D expenses be deducted proportionally when manufacturing enterprises make final settlement in 2020?


The announcement of the Ministry of Finance and the State Administration of Taxation on further improving the pre Tax Deduction Policy for R & D expenses (No. 3, 2021) stipulates that the policy of calculating and deducting R & D expenses on a pro rata basis for manufacturing enterprises will be implemented from January 1, 2021.This time is the concept of tax period. The period of final settlement in 2020 is from January 1, 2020 to December 31, 2020, It is not applicable to the policy of manufacturing R & D expenses plus deduction which is implemented from January 1, 2021. 


2. If our company is engaged in multi industry operation, how to master the caliber of total income when judging whether it meets the requirements of manufacturing enterprises?


The total income shall be implemented in accordance with Article 6 of the enterprise income tax law. Specifically, it refers to the income that the enterprise obtains from various sources in monetary and non monetary forms, including income from sales of goods, income from providing labor services, income from transferring property, dividend, dividend and other equity investment income, interest income, rent income, royalty income, donation income and other income.


3. We are a computer manufacturer. Can we deduct the R & D expenses of other units according to the proportion?


The entrusted R & D expenses incurred by a manufacturing enterprise also belong to the R & D expenses of the enterprise, and the policy of adding and deducting on a pro rata basis can be applied according to the regulations. The details are as follows: the expenses incurred in the R & D activities entrusted by the enterprise to domestic and external institutions or individuals shall be included in the R & D expenses of the entrusting party according to 80% of the actual amount of the expenses, and shall be calculated and deducted in proportion;The expenses incurred in entrusting overseas R & D activities shall be included in the entrusted overseas R & D expenses of the entrusting party according to 80% of the actual expenses incurred.The part of the entrusted overseas R & D expenses not exceeding two thirds of the qualified domestic R & D expenses can be calculated and deducted on a pro rata basis before the enterprise income tax. 


4. Our company incurred R & D expenses in 2021. What requirements should we meet if we want to enjoy the R & D expense plus policy in the prepayment stage?


Enterprises who enjoy the preferential deduction of R & D expenses in advance shall apply for advance payment in the third quarter (quarterly prepayment) or September (monthly prepayment) of the current year, According to the situation of R & D expenses to be entitled to additional deduction (the first half of the year), fill in the "preferential list of additional deduction of R & D expenses" (a107012) in the annual tax return of the people's Republic of China for enterprise income tax (Class A, 2017 Edition), and collect and sort out the form together with other retained materials for future reference. The tax authorities will timely carry out follow-up management.In the follow-up management, the enterprise shall be able to provide the retained materials for reference according to the requirements, so as to confirm that the preferential items enjoyed meet the conditions.If an enterprise fails to provide materials for future reference as required by the tax authorities or practices fraud, the tax authorities will recover the preferential treatment it has enjoyed in accordance with the law on tax administration and other relevant provisions.


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