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In order to implement the Outline of the State Mid/Long-term Scientific and Technical Development (2006-2020) (No. 44 [2005]), according to the Circular of the State Council on Printing, Distributing and Implementing Several Supporting Policies for the Outline of the State Mid/Long-term Scientific and Technical Development (2006-2020) (No. 6 [2006] of the State Council), we hereby notify the relevant preferential policies for enterprise income taxes on technical innovation enterprises as follows: I. EXPENSES FOR TECHNICAL DEVELOPMENT For the Chinese-funded and foreign-funded enterprises, scientific research institutions and universities and colleges with complete financial verification system and whose tax is levied by account check (hereinafter referred to as the enterprises), the expenses for technical development incurred from the research and development of new products, new technologies and work techniques shall be deducted before tax levy according to the relevant provisions. The following items of expenses for technical development that actually occur within the taxable year by any of the aforesaid enterprises is allowed, on the basis of 100% offset according to the relevant provisions, be re-deducted at the rate of 50% the amount that actually occurs before the enterprise income tax is levied, including: the expenses for new product designs, the expenses for formulating technical procedures, expenses for equipment adjustments, expenses for trial production of raw materials and semi-products, expenses for technical books and materials, expenses for intermediate experiments that have not been included into the state plan, wages of researchers, depreciation of instruments and equipments for research and development, expenses for entrusting any other entity or individual to make scientific research and trial-production and other expenses directly related to scientific research and trial-production. The part that fails to be offset by the expense for technical development that actually occurs in an enterprise's annual year may be offset from the taxable income of the enterprise in the next following year, for which the term for off-set shall not be longer than 5 years. II. FUND FOR THE STAFF EDUCATION For the fund for the staff education that an enterprise collects and actually uses in the very year, the part within 2.5 % of the aggregate taxable wage may be deducted before the enterprise income tax is levied. III. ACCELERATED DEPRECIATION For the enterprise's instruments and equipments for research and development with a unit value of less than 0.3 million yuan, the expenses that can be calculated into the cost in one or several installments may be deducted before the enterprise income tax is levied. Any instrument or equipment that meets the standards for fixed assets shall be subject to separate administration, for which no depreciation shall be made. For the enterprise's instruments and equipments for research and development with a unit value of more than 0.3 million yuan, accelerated depreciation may be based on either the double-declining balance method or the sum-of-the-year-digits method. Once a specific method of depreciation is determined, it shall not be altered at random. The instruments and equipments as prescribed in the aforesaid two paragraphs refer to those that an enterprise has newly purchased for research and development after January 1, 2006. IV. TAX PREFERENTIAL POLICIES FOR NEW HI-TECH ENTERPRISES As of January 1, 2006, a new hi-tech enterprise established within a state hi-tech industrial park is exempted from enterprise income taxes within 2 years as of the year when it starts to make profits. Upon expiration of the term for tax exemption, the enterprise income tax shall be levied at a reduced tax rate of 15 %. After the aforesaid enterprise starts its business operation, its profit-making year shall be the first taxable year when it starts to make profits. Where any enterprise is run at a loss at the beginning, the balance may be made up on a year-on-year basis according to the provisions of tax law. Its first profit-making year shall be the taxable year when it offsets the losses and begins to earn profits. For any Chinese-funded enterprise that enjoys the tax preferential policy for two-year exemption of enterprise income tax as of the year when it is put into business operation, it can enjoy the preferential policy till expiration and may no longer enjoy any preferential policy for the exemption of enterprise income tax within 2 years as of its profit-making year upon expiration. The present Circular shall come into force as of January 1, 2006. In case any relevant provision conflicts with the present Circular, the present Circular shall prevail. Where the state makes any further reform on the tax levy system, the relevant tax preferential policies shall be carried out according to the updated provisions. |
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