China’s tax and fee cuts last year were worth more than CNY2.2 trillion. Tax deductions extended to companies’ research and development expenses rose significantly, the State Taxation Administration (SAT) said. These measures are believed to have greatly boosted companies’ confidence to spend more on technological innovations. This, in turn, will inject greater vitality into corporate development as well as economic growth, said industry experts. The top tax authority said that companies saved CNY1.85 trillion in the form of tax deductions for R&D expenses in the first three quarters, up nearly 14% year-on-year. Corporate taxpayers from the manufacturing sector benefited the most, receiving 60% of such R&D tax deductions totaling over CNY1.1 trillion.
The R&D tax deduction was introduced as a preferential tax policy, allowing companies to save more by way of a certain percentage of their R&D expenditure. In March last year, China lifted the percentage to 100% from 75% and made the policy a permanent one. For eligible companies from the integrated circuit and machine tool sectors, the percentage is even higher at 120%. Huang Yun, Spokesman of the STA, disclosed that though the full-year figure for R&D tax deductions is still being worked out, the figure for 2024 will “only be bigger”. “More favorable tax policies will be implemented to facilitate convenience of companies and better support their innovative development, as well as the country’s self-reliance on high-level science and technology,” Huang said. Li Xuhong, head of fiscal taxation policy and application at the Beijing National Accounting Institute, said: “Such efforts will help corporate taxpayers save fully on operating costs through R&D expense deductions. Relief will further stimulate their vitality and drive innovation capability, all of which will be strong drivers of the country’s economic development.”
The tax authority also noted that the country’s full-year tax revenue, which excludes the export tax rebate, reached CNY31.7 trillion last year. Revenue from social security fees was CNY8.2 trillion. Notably, tax deferrals for foreign- funded enterprises saw a stable 0.8% year-on-year increase in 2023 to CNY141.2 billion. Tax deferral is a preferential policy extended to foreign companies to delay tax payments to some future date, which helps them invest the money that might otherwise go toward taxes in areas with greater long-term growth potential. To facilitate international taxation services, the STA has been working to promote global taxation services using TaxExpress, a long-term mechanism to help better understand taxation policies and related information for foreign companies investing in China and Chinese companies investing abroad. Last week, the tax authority released an updated tax policy guideline on stabilizing foreign investment and foreign trade. The guideline includes 51 detailed entries, the China Daily reports.
