China perpetuates tax relief policy for companies' R&D costs

A tax relief policy that prompts R&D activities of companies that was introduced last year has been formalized into a regulation, according to the State Taxation Administration.

A tax relief policy introduced last year has been formalized into a regulation, allowing companies to receive the majority of the annual benefit from a tax deduction of research and development (R&D) costs at least three months in advance, according to China's State Taxation Administration.

From this year on, companies can deduct their R&D expenses that occurred during the first nine months from their concurrent taxable income when they file for taxes in October, stated a notice issued by the administration.

The policy was first adopted last October as a supportive measure to spur innovation amid COVID-19 strains. Without this arrangement, enterprises could only expense their annual R&D costs in the following year.

China has allowed technology-intensive small and medium-sized firms and those in the manufacturing sector to deduct twice the sum of their R&D costs from taxable income, up from 175 percent previously.

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