China's Extra Deduction on R&D Expenses

The State Taxation Administration (STA) and the Ministry of Finance (MOF) have jointly released the Announcement on Relevant Matters Concerning Optimizing the Policy for Extra Deduction on R&D Expenses in Prepayment of Tax Returns (the "Announcement").

The Announcement specifies that, in accordance with the Announcement of the State Taxation Administration on Matters concerning the Preferential Policy for Enterprises to Enjoy Extra Deduction on R&D Expenses in Prepayment of Tax Returns, the Announcement of the State Taxation Administration on Issuing the Revised Measures for Handling Enterprise Income Tax Preferences, and other regulations, enterprises may enjoy the policy for extra deduction on R&D expenses at the time of prepayment of tax returns in October and in their annual final settlement. In addition to the aforesaid two time nodes, a new time node is added, under which enterprises are allowed to enjoy the policy for extra deduction on R&D expenses incurred in the first half of the said year when they prepay the enterprise income tax (EIT) for the second quarter (in the case of quarterly prepayment) in July or prepay EIT for June (in the case of monthly prepayment) and if the R&D expenses can be accurately collected and calculated.

(Source: http://www.chinatax.gov.cn/chinatax/n810341/n810825/c101434/c5205530/content.html)