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Tax Insights

2018-08-11
1147 | 42 | 5

R&D Expense Super Deduction

Step 1: Check the amount of Corporate Income Tax (CIT) tobe saved once the enterprises apply for the Super Deduction policy.  The check points are as follows:

 

 

Check the  current annual profitability of your company

Situation

If profitable

If unprofitable

Analysis and decision making

Check whether your company is  eligible for the 150% Super Deduction.  Qualifying for the Super Deduction  policy will reduce your company’s CIT burden.

Check the reasons behind the company  losses

Low related party transaction  pricing leading to losses.

Normal business operations and  management leading to losses, however, it is estimated that the company will  be highly profitable after 5 years.

Check whether your company is  eligible for the 150% Super Deduction.  Obtaining the Super Deduction  qualification will reduce the risk of your company incurring huge amount of  CIT if the tax authorities were to adjust the related party transaction  price.

In that case, obtaining the 150%  Super Deduction qualification will increase the amount of company losses  within the 5 years to come and when the company is highly profitable 5 years  later, the company can offset the previous 5 years’ losses with the  current year’s profits. Thereby, less or no CIT will  be paid.

RTF application suggestions

1.Check whether the R&D cost can  be calculated separately and  clearly.

2.Check whether the R&D products  have reached the intellectual property rights application stage, if yes,  start applying.

3.File the Technology Contracts and  R&D projects at the Science & Technology Commission and Commission of  Commerce departments.

4.Before the annual CIT clearance  (May 31),file for the  R&D 150% super deduction at the  tax bureau. At the same time, issue the audit report and confirm the tax  authorities requirements are satisfied for the purpose of risk control.











 

Step 2:  Contact RTF andRTF project team can help your company to check the feasibility of this  tax saving opportunity.

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