Pre-Tax Deductions in China to Support Science and Technology

In order to support the innovative development of high-tech enterprises and promote the renewal of equipment and technological upgrading of enterprises, China's Ministry of Finance, State Administration of Taxation and Ministry of Science and Technology have jointly made a decision to support pre-tax deductions for scientific and technological innovation and issued relevant enterprise income tax pre-tax deduction policies. The specific conditions are as follows:

1. New equipment and apparatus (fixed assets other than buildings and structures) purchased by high-tech enterprises between October 1st , 2022 and December 31st, 2022 are allowed to be full deducted in the current year as a lump sum when calculating taxable income for CIT purposes, and a 100% pre-tax deduction is allowed. 

The policy is applicable to all enterprises with the status of high-tech enterprises within the fourth quarter of this year. Enterprises that choose to apply the policy in the year in which the deduction is insufficient may carry forward it to future years in accordance with the relevant regulations in force.

2. Enterprises that currently apply the CIT pre-tax deduction ratio of 75% for R&D expenses will have their pre-tax deduction ratio increased to 100% during the period from October 1st, 2022 and December 31st, 2022. 

When enterprises are calculating the preferential pre-tax deduction for R&D expenses in the 2022 annual enterprise income tax filing, they may choose to calculate the R&D expenses for the fourth quarter based on the actual amount incurred or the actual R&D expenses incurred for the whole year multiplied by the ratio of the number of months of operation after October 1st, 2022 to the actual number of months of operation in 2022.

The policy of adding deductions for R&D expenses is a special preferential policy to stimulate enterprises to increase their R&D investment. 

This preferential tax policy for high-tech enterprises will help increase the ability of enterprises to pay dividends and better establish incentive mechanisms for technicians and managers, mobilize various types of talents in enterprises, and continuously enhance the powers and capacity of science and technology for enterprise development.

At PHC Advisory, our team is constantly monitoring the most recent incentives and subsidies accessible to businesses in China. Feel free to reach out to us at to find out more about preferential policies in China that your company could benefit from.