China: Enhancements to R&D “super deduction” and innovation zones

China: R&D “super deduction” and innovation zones

China’s State Council announced enhancements and improvements to the research and development (R&D) “super deduction” and to the innovation demonstration zones regime.

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R&D “super deduction”

Beginning 1 January 2016, the revised R&D “super deduction” will provide for: 

  • An expanded scope of eligible R&D activities
  • A deduction allowed for previously unclaimed R&D expenses, over a preceding three-year period
  • Simplification of allocation and accounting of R&D expenses
  • Streamlined R&D validation procedures and post-filing management for the R&D “super deduction”
  • Additional expenses to be eligible for the R&D “super deduction” including expatriate fees, trial product testing, inspection fees, consulting fees, and cooperative or contract R&D-related costs

Innovation demonstration zones

The announcement provides that the preferential income tax policy as piloted in innovation demonstration zones will be expanded to all of China. Specifically:

  • There are new benefits for investments in high technology and new technology enterprises, effective 1 October 2015.
  • A corporate income tax exemption is available relating to income from certain technology transfers.
  • Individual income tax relating to stock options provided to scientific and technological personnel involved in a transformation project of new and high-tech achievement may be paid in instalments over a five-year period.

 

Read an October 2015 report prepared by the KPMG member firm in China: R&D Super Deduction and Innovation Demonstration Zones expanded and improved

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