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What is the additional tax deduction for Research and Development (R&D) expenses?
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Additional tax deduction is a kind of preferential policy enterprise income tax in terms of tax base, which generally refers to the deduction amount when calculating the taxable income by adding a certain proportion on the basis of the actual expenditure amount according to the tax law. If the additional tax deduction is implemented on R&D expenditure of an enterprise, it is called additional tax deduction for R&D expenses.
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Q:
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What is the method to expense and capitalize R&D expenses?
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According to the current policies and regulations, if the R&D expenses of an enterprise for developing new technologies, new products and new processes do not form intangible assets and are included in the current profits and losses, additional 50% of the R&D expenses shall be deducted on the basis of actual deduction according to regulations; if such expenses form intangible assets, they shall be amortised based on 150% of the cost of intangible assets. For small and medium-sized technology enterprises, from January 1, 2017， the additional deduction proportion of R&D expenses will be increased from 50% to 75%. In accordance with the Government Report of Year 2021 released in the recent Two Sessions, this preferential policy will be implemented continuously.
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Can enterprises which enjoy additional tax deduction for R&D expenses policy are eligible for overlapping other preferential policies of enterprise income tax？
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According to relevant rules, all tax preferential policies stipulated in the enterprise income tax law and its implementation regulations can be enjoyed simultaneously if the enterprise meets the prescribed requirements. Therefore, if an enterprise meets the conditions of enjoying the additional deduction on R&D expenses and other preferential policies, it can enjoy the relevant preferential policies at the same time.
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Can science and technology SMEs enjoy the additional deduction policy of R&D expense when prepay quarterly EIT?
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The policy of additional tax deduction for R&D expenses shall be enjoyed upon annual final settlement, which means, when the enterprises declare and prepay EIT each quarter, it is allowed to calculate deduction according to the actual expenditure, and it is allowed to enjoy the preferential policy of additional tax deduction according to the regulations upon annual final settlement.
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Can enterprises enjoy the additional deduction policy on the related expenses incurred in creative design activities enjoy the?
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The document Cai Shui [2015] NO.119 specifies for the relevant expenses incurred by enterprises on creative design activities for innovative, creative and breakthrough products, enterprises can claim additional deduction according to the regulations.
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