Circular on Policy Issues Relevant to the Pre-tax Super-deduction of Research and Development Expenses

(Issued by the Ministry of Finance and the State Administration of Taxation on September 29 2013 and effective as of January 1 2013.)

Cai Shui [2013] No.70

Finance departments (bureaux), offices of the State Administration of Taxation and local taxation bureaux of the provinces, autonomous regions, municipalities directly under the central government and cities with independent development plans and the finance bureau of the Xinjiang Production and Construction Corp:

Pursuant to relevant provisions such as the PRC Enterprise Income Tax Law, the Implementing Regulations for the PRC Enterprise Income Tax Law (Order of the State Council No.512) and the Central Committee of the Communist Party of China and the State Council, Opinion on Intensifying the Reform of the Science and Technology System to Accelerate the Establishment of the State's Innovation System and with the agreement of the Ministry of Science and Technology after consultations, we hereby notify you about policy issues relevant to the pre-tax super-deduction of research and development expenses as follows:

1. The following expenses and expenditures incurred by an enterprise engaged in research and development activities may be included within the scope of research and development expenses eligible for pre-tax super-deduction:

(1) basic old-age insurance premiums, basic medical insurance premiums, unemployment insurance premiums, work-related injury insurance premiums, maternity insurance premiums and contributions to housing funds that, based on the scope and criteria specified by the relevant competent State Council department or provincial-level people's government, are paid by the enterprise for employees who directly engage in research and development activities;

(2) expenses for the operational maintenance, calibration, inspection, repair, etc. of instruments and equipment specifically used in research and development activities;

(3) expenses for the purchase of samples, prototypes and general testing means that do not constitute fixed assets;

(4) clinical trial expenses for the research and development of new pharmaceuticals; and

(5) expenses for the expert evaluation of research and development achievements.

2. An enterprise may engage a qualified accounting firm or tax agent to issue a dedicated audit report or attestation report on the research and development expenses super-deductible for the year in question.

3. If the competent tax authority has objections to a research and development item reported by an enterprise, it may require the enterprise to provide an assessment opinion on the research and development item issued by the science and technology department of the government at the prefectural city level or above.

4. Other issues relevant to the eligibility of enterprises for the policy of pre-tax deduction of research and development expenses shall be handled in accordance with the State Administration of Taxation, Circular on the Issuance of the 《Measures for the Administration of the Pre-tax Deduction of the Research and Development Expenses of Enterprises (Trial Implementation)》(Guo Shui Fa [2008] No.116).

5. This Circular shall be effective as of January 1 2013.

(Issued by the Ministry of Finance and the State Administration of Taxation on September 29 2013 and effective as of January 1 2013.)

Cai Shui [2013] No.70

Finance departments (bureaux), offices of the State Administration of Taxation and local taxation bureaux of the provinces, autonomous regions, municipalities directly under the central government and cities with independent development plans and the finance bureau of the Xinjiang Production and Construction Corp:

Pursuant to relevant provisions such as the PRC Enterprise Income Tax Law, the Implementing Regulations for the PRC Enterprise Income Tax Law (Order of the State Council No.512) and the Central Committee of the Communist Party of China and the State Council, Opinion on Intensifying the Reform of the Science and Technology System to Accelerate the Establishment of the State's Innovation System and with the agreement of the Ministry of Science and Technology after consultations, we hereby notify you about policy issues relevant to the pre-tax super-deduction of research and development expenses as follows:

1. The following expenses and expenditures incurred by an enterprise engaged in research and development activities may be included within the scope of research and development expenses eligible for pre-tax super-deduction:

(1) basic old-age insurance premiums, basic medical insurance premiums, unemployment insurance premiums, work-related injury insurance premiums, maternity insurance premiums and contributions to housing funds that, based on the scope and criteria specified by the relevant competent State Council department or provincial-level people's government, are paid by the enterprise for employees who directly engage in research and development activities;

(2) expenses for the operational maintenance, calibration, inspection, repair, etc. of instruments and equipment specifically used in research and development activities;

(3) expenses for the purchase of samples, prototypes and general testing means that do not constitute fixed assets;

(4) clinical trial expenses for the research and development of new pharmaceuticals; and

(5) expenses for the expert evaluation of research and development achievements.

2. An enterprise may engage a qualified accounting firm or tax agent to issue a dedicated audit report or attestation report on the research and development expenses super-deductible for the year in question.

3. If the competent tax authority has objections to a research and development item reported by an enterprise, it may require the enterprise to provide an assessment opinion on the research and development item issued by the science and technology department of the government at the prefectural city level or above.

4. Other issues relevant to the eligibility of enterprises for the policy of pre-tax deduction of research and development expenses shall be handled in accordance with the State Administration of Taxation, Circular on the Issuance of the 《Measures for the Administration of the Pre-tax Deduction of the Research and Development Expenses of Enterprises (Trial Implementation)》(Guo Shui Fa [2008] No.116).

5. This Circular shall be effective as of January 1 2013.