An Opportunity for Tax Savings

Transcription

1 China Research & Development Tax Services An Opportunity for Tax Savings

2 Did you know that Effective communication could significantly increase Research & Development (R&D) tax benefits? Various eligible R&D activities were carried out outside company R&D departments? Slight change in R&D behaviour might result in more eligible R&D tax benefits? R&D Tax Incentives HNTE Super Deduction 15% For HNTE ( High and New Technology Enterprise ) Corporate Income Tax (CIT) Rate is 15% 150% R&D expense 150% eligible R&D expenses could be deducted before CIT Benefits from R&D Tax Incentives Taxable income = 100 million Reduced HTNE CIT rate = 15% Tax saving = 10 million R&D expense = 100 million Super deduction (50% of R&D expense) = 50 million Tax saving ( normal CIT rate of 25%) = 12.5 million or Tax saving (HNTE CIT rate of 15%) = 7.5 million Money saved 10,000,000 Money saved 7,500,000 ~ 12,500,000 Qualified Enterprise HNTE Criteria 1. Products/services fit into one of the eight HNT Area 2. Science & Technical personnel > 30%; Personnel engaged in R&D activities > 10% 3. Engage in qualified R&D activities and incur relevant R&D expenses 4. IP registration or licensing requirements 5. HNT products revenue > 60% of the total revenue of the enterprise in the year of application 6. Obtain score of more than 70 in indicator requirement assessment R&D expense super deduction Criteria 1. Resident enterprise 2. R&D activities fit into HNT Area or encouraged key areas 3. Setting separate expense account 4. Can accurately record the R&D expenses PwC 1

3 Contributing to your success PwC s China R&D Tax Services professionals have the finest cross-disciplinary credentials. Our team of engineers, scientists, accountants and tax practitioners has exactly the expertise required to understand the issues and challenges you are facing, and to match your needs relating to R&D tax benefits. Your tax and accounting group Your engineering / technical group PwC R&D Tax Services group Industry expertise The PwC R&D Tax Services team has experience working across many industries, including: Aerospace Agriculture Automobile Banks Chemical Clean tech Energy Entertainment/Media Financial institutions Life science Manufacturing Mining Oil and gas Pharmaceuticals Pulp and paper Software Technology Telecommunication China Tax/S&T authorities Leveraging on PwC global methodologies and best practices PwC s Global R&D Tax Services Network combines deep technical expertise, local knowledge, and global perspective to provide our clients with an unrivalled service. We have already built up the global cooperation with our offices located at: PwC US UK Canada Germany Australia France 2

4 The PwC R&D Tax Services advantage Using a proven proprietary methodology, we add value to increase your tax benefit and reduce the demands on your time and resources. We give you: Confidence that all eligible R&D projects will be identified Reduced preparation time demands on your staff Flexible, one-stop service options Flexible fee options aligned with your business requirements The benefit of our strong relationships with government authorities concerned Our recommendations for system and process improvement Finance/tax/ technical professional Flexible service options Extensive industry experience Strategic consulting Multilingual service team PwC R&D Tax Services advantage One-stop service shop Work to your schedule Tax risk control and mitigation Proprietary methodology Audit defense support PwC 3

5 R&D expense super deduction related services Review on application package for R&D super deduction Analyzing the eligibility issues in China, including the nature of expenses incurred, reporting and record keeping, IP ownership, potential intra-group recharges and determining the claimable potential R&D expenses. Reviewing the prepared application package based on our analysis results. Documents preparation and R&D super deduction application Identifying the R&D expenses that are eligible for the R&D Expenditure Super Deduction and working with client to assist in the preparation of R&D Expenditure Super Deduction claim, including internal documentation review, preparation, completion and submission of the Assessment Forms, and preparation R&D numbers in CIT returns. R&D expenditure tracking system establishment Providing R&D assessment and assistance of establishing R&D expenditure tracking system, including develop a R&D activity mapping, prepare a R&D activity and procedural manual, establish a cross-departmental/cost centres R&D expense tracking system, provide training to employees concerned, etc R&D super deduction related audit defense service Providing assistance in respect of queries and/or audits from the science and technology administration authorities and/or the China tax authorities in relation to the R&D expenditure super deduction claims notwithstanding the claim may have previously been lodged during the annual CIT filing. PwC 4

6 HNTE related service Review on HNTE application package Assisting the client to analyze whether the client qualifies for the HNTE criteria: Revenue, Proprietary IP, Qualifying products or services, Technical personnel requirement, R&D expenditure requirement and other indicator requirement, and reviewing the prepared application package based on our analysis results. Documents preparation and HNTE application /re-application Performing full scope HNTE review, including identifying the gaps between real situation and regulation requirements, providing assistance in remediation strategy formulation (if necessary), assistance in documents preparation, and negotiate with relevant Chinese government authorities during application process (where applicable and if required). Annual review on HNTE qualification Assisting the clients to analyze whether the client qualifies for the 6 required HNTE criteria annually after they obtained the HNTE qualification, and providing assistance in remediation strategy formulation (if necessary), to seek possibilities for the client to enjoy the 15% preferential CIT rate. R&D expenses review for HNTE application purposes Assisting the client to analyse whether the client qualifies for R&D expense criteria for HNTE application/re-application purposes, and provide assistance in remediation strategy formulation (if necessary). HNTE related audit defense service Clarifying motivations behind a tax audit, identifying key audit auditors, providing technical support, presenting positive arguments, providing assistance in respect of queries and/or audits from authorities. PwC 5

7 Contact us China & Hong Kong Roger Di Partner China R&D Tax Services Market Leader Tel: + 86 (10) roger.di@cn.pwc.com North China Central China South China Roger Di Partner Tel: + 86 (10) roger.di@cn.pwc.com Liang Gong Partner Tel: + 86 (21) liang.gong@cn.pwc.com Daisy Kwun Partner Tel: + 86 (20) daisy.kwun@cn.pwc.com Hong Kong Syd Lin Director Tel: + 86 (852) syd.lin@hk.pwc.com Kevin Huang Director Tel: + 86 (755) kevin.j.huang@cn.pwc.com PwC 6

8 This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors PricewaterhouseCoopers Consultants (Shenzhen) Limited. All rights reserved. PwC refers to the China member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see for further details.