Tax and charge reductions support businesses’ R&D and developments

The value of China’s tax and fee reductions in 2018 was about 2.2 trillion yuan ($305 billion). According to the State Taxation Administration, tax deductions for businesses’ R&D costs increased dramatically on Thursday. It is thought that these actions have significantly increased businesses’ confidence to invest more in technical developments. According to industry analysts, this will therefore provide business expansion and economic progress more vigor. During a State Council press briefing, the top tax body revealed that, in the first three quarters, enterprises saved 1.85 trillion yuan in tax deductions for R&D spending, an increase of about 14% year over year.

 

Manufacturing-related corporate taxpayers reaped the greatest benefits, taking home 60% of the R&D tax deductions, which amounted to more than 1.1 trillion yuan. As a preferential tax policy, the R&D tax deduction was implemented, enabling enterprises to increase their savings by deducting a specific percentage of their R&D spending. China increased the ratio from 75% to 100% in March of last year and made the measure permanent. The ratio rises to 120% for qualified businesses in the machine tool and integrated circuit industries. STA spokeswoman Huang Yun revealed that while the exact amount for R&D tax deductions for the entire year is still being determined, it will “only be bigger” in 2023.

 

The Beijing National Accounting Institute’s Li Xuhong, head of fiscal taxation policy and application, stated: “Such efforts will help (corporate) taxpayers save fully on operating costs through R&D expense deductions.” Relief will boost their energy and capacity for creativity even more, both of which will be important forces behind the nation’s economic growth.” In an interview with China Daily, Jiao Jian, the tax affairs head of BOE Technology Group Co Ltd’s branch in Hefei, Anhui province, which makes display panels, stated that the company’s ability to maintain the momentum it had gained in key display technologies was primarily due to tax reliefs stabilizing its finances.

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