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R&D Deduction for Sci-tech SME

Three departments, including the Ministry of Finance ("MOF"), have jointly released the Announcement on Further Increasing the Proportion of the Pre-tax Additional Deduction for Research and Development Expenses for Small and Medium Sci-tech Enterprises (the "Announcement"), with effect from January 1, 2022.

The Announcement specifies that, regarding the actual research and development ("R&D") expenses incurred by a small and medium sci-tech enterprise its R&D activities, starting from January 1, 2022, an additional 100% of the actually incurred costs may be deducted before tax, on the basis of actual deductions as required, provided that no intangible asset has been formed and then balanced into its current gains and losses; where any intangible asset has been formed, starting from January 1, 2022, such costs may be amortized at the rate of 200% of the intangible asset's costs before tax. The Announcement further clarifies that the conditions for identifying and the administrative measures for the small and medium sci-tech enterprises shall be subject to the Circular of the Ministry of Science and Technology, the Ministry of Finance and the State Taxation Administration on Issuing the Measures for Evaluating Small and Medium Sci-tech Enterprises.



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