China Tax Alert - Issue 31, November 2013
The Ministry of Finance (MOF) and the State Administration of Taxation (SAT) jointly issued Circular 70 to broaden the scope of research and development (R&D) expenses that are eligible for super deduction.
SAT issued Circular 116 on 10 December 2008, which specifies definitions of R&D activities, eligible enterprises, scope of expenses, accounting requirements and tax administration for R&D expense super deduction purposes. Circular 116 outlines eight types of R&D expenses that are eligible for super deduction, but certain expenses that are directly related to R&D activities are excluded. To encourage enterprises to engage in R&D activities, Circular 70 broadens the scope of R&D expenses that are eligible for super deduction, allowing enterprises to benefit from greater tax savings under the super deduction regime.