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China’s Incentives for High-Tech

Three authorities, including the Ministry of Finance ("MOF"), have jointly released the Announcement on Increasing Pre-tax Deduction for Supporting Sci-tech Innovation (the "Announcement").

The Announcement specifies that, for the equipment and appliances newly purchased by high-tech enterprises during October 1, 2022 and December 31, 2022, the expenses are allowed to be deducted in full in the current year on a one-time basis when calculating taxable income, and an extra 100% pre-tax deduction is allowed. This policy will be applicable to all enterprises with high-tech enterprise qualification in the fourth quarter of 2022. If an enterprise chooses to enjoy this policy and the deduction is insufficient in the current year, the balance may be carried forward to subsequent years and the existing relevant regulations may still be applicable. Meanwhile, the Announcement clarifies that, for enterprises that currently enjoy pre-tax deduction for R&D expenses at the ratio of 75%, the pre-tax deduction ratio will be increased to 100% during the period from October 1, 2022 to December 31, 2022.



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