Policy Interpretation: STA Announcement on Further Implementing R&D Additional Deduction Policy

In order to implement the State Council's measures to encourage enterprises to increase R&D investment and optimize the implementation of the super deduction policy for R&D expenses, to carry out the "Practical Matters for Taxpayers and Fee Payers and Spring Breeze Action for Convenient Tax Services", to enable taxpayers to fully enjoy the policy dividends, to stimulate enterprises' enthusiasm for increasing R&D investment, and to facilitate enterprises' early enjoyment of the preferential policy for additional deduction of R&D expenses, the State Administration of Taxation formulated the "Announcement on Issues Concerning the Further Implementation of the Policy for Additional Deduction of R&D Expenses" (2021 No. 28, hereinafter referred to as the "Announcement"). The following is an interpretation:

I. What is the main background for the issuance of the "Announcement"?

Answer: The policy of additional deduction for R&D expenses is an effective policy tool to support enterprise scientific and technological innovation. The Party Central Committee and the State Council have always attached great importance to the implementation of this policy, taking multiple measures to enable enterprises to fully enjoy the policy dividends. Recently, the State Council has launched further measures to encourage enterprises to increase R&D investment and optimize the implementation of the policy. In order to implement the State Council's decisions and arrangements in detail, increase the sense of gain for enterprises, and reduce the tax compliance burden, our bureau issued this "Announcement".

II. What are the main contents of the "Announcement"?

Answer: The "Announcement" mainly includes three aspects:

First, when making the advance declaration in October this year, enterprises are allowed to choose independently to enjoy the additional deduction for R&D expenses for the first three quarters of the year in advance. Previously, the additional deduction for R&D expenses was enjoyed only at the annual final settlement, not during ordinary advance declarations. At the end of March this year, the fiscal and tax departments clarified that when making the advance declaration in October, enterprises were allowed to enjoy the additional deduction for R&D expenses for the first half of the year. According to the latest State Council arrangements, the "Announcement" clarifies that when making the advance declaration in October this year, enterprises are allowed to enjoy one more quarter of additional deduction for R&D expenses.

Second, a new simplified format for the R&D expenditure auxiliary ledger is added. In order to facilitate enterprises to prepare compliant auxiliary ledgers for R&D expenses, the State Administration of Taxation issued the "Announcement on Issues Concerning the Policy for Pre‑tax Additional Deduction of Enterprise R&D Expenses" (2015 No. 97, hereinafter referred to as Announcement 97) in 2015, releasing the 2015 version of the R&D expenditure auxiliary ledger format, which has played a positive role in helping taxpayers accurately collect R&D expenses and enjoy preferential policies. Considering that some small and medium‑sized enterprises have relatively weak financial accounting capabilities and find it difficult to accurately collect and fill in the 2015 version, the "Announcement" adds a 2021 version of the R&D expenditure auxiliary ledger format, which reduces the difficulty of filling.

Third, the calculation method for the cap of "other related expenses" has been adjusted and optimized. Originally, the cap for "other related expenses" was calculated separately for each R&D project. The "Announcement" changes it to a unified calculation of the cap for all R&D projects, simplifying the calculation method and allowing the caps for "other related expenses" of multiple projects to be used interchangeably, thereby generally increasing the amount that can be additionally deducted.

III. What materials should enterprises prepare to enjoy the additional deduction for R&D expenses during the October declaration period this year?

Answer: Enterprises enjoy this preferential treatment under the principle of "actual occurrence, self‑assessment, declaration for enjoyment, and retention of relevant materials for future inspection". Based on the actual R&D expenses incurred, enterprises directly fill in the additional deduction amount for the first three quarters in the advance declaration form according to tax policy provisions, and prepare the auxiliary ledger for R&D expenses for the first three quarters and the "Detailed Schedule for Additional Deduction of R&D Expenses" (A107012) and other materials for retention.

IV. If an enterprise does not enjoy the additional deduction for R&D expenses during the October declaration period this year, can it still enjoy it later?

Answer: If an enterprise does not choose to enjoy the preferential treatment during the October advance declaration period, it can enjoy it when handling the final settlement before the end of May next year.

V. Compared with the 2015 version of the R&D expenditure auxiliary ledger format, in what aspects has the 2021 version been optimized and simplified?

Answer: Compared with the 2015 version, the 2021 version of the R&D expenditure auxiliary ledger format has been optimized and simplified mainly in the following aspects:

First, consolidate auxiliary ledger formats. The 2015 version includes four types of auxiliary ledgers (independent R&D, entrusted R&D, cooperative R&D, and centralized R&D) and a summary table, totalling "4 auxiliary ledgers + 1 summary table". The 2021 version merges the four types into one category, totalling "1 auxiliary ledger + 1 summary table", reducing the number of auxiliary ledger formats overall.

Second, streamline auxiliary ledger information. The 2015 version required detailed information on six major categories of expenses such as personnel and labor, and also required accounting information such as "debit amount" and "credit amount". The 2021 version only requires enterprises to fill in the total of the six major categories, without requiring detailed breakdowns, and deletes some accounting information, reducing the workload for enterprises.

Third, adjust and optimize operational procedures. The 2015 version did not reflect policy changes after 2015, such as not specifying the requirements for filling in overseas entrusted R&D expenses, requiring enterprises to adjust the format or analyze and fill in on their own. The 2021 version fully considers adjustments to tax policies, adds relevant columns for overseas entrusted R&D, and reflects adjustments to the calculation method of the cap for other related expenses. The "Announcement" also provides detailed explanations of the filling procedures to facilitate accurate collection and accounting by taxpayers.

VI. After the implementation of the "Announcement", can the 2015 version of the R&D expenditure auxiliary ledger format continue to be used?

Answer: The R&D expenditure auxiliary ledger format is positioned as a reference sample for enterprises to enjoy the additional deduction policy, and is not mandatory. Therefore, after the release of the 2021 version, the 2015 version remains valid. Taxpayers may choose to use either the 2021 version or continue using the 2015 version.

It should be noted that if enterprises continue to use the 2015 version, they may refer to the 2021 version to make corresponding adjustments to the columns for overseas entrusted R&D expenses and the calculation formula for the cap of other related expenses.

VII. Can enterprises design their own auxiliary ledger formats?

Answer: Taxpayers may design their own auxiliary ledger formats. To ensure that enterprises accurately collect R&D expenses eligible for additional deduction and that they match the data items of the "Detailed Schedule for Additional Deduction of R&D Expenses" (A107012), the self‑designed auxiliary ledger format should at least include the data items listed in the 2021 version and have consistent logical relationships.

VIII. Why was the calculation method for the cap of other related expenses adjusted, and what are the benefits for enterprises after the adjustment?

Answer: Under the current policy, other related expenses are subject to a cap management, not exceeding 10% of the total deductible R&D expenses. Announcement 97 stipulated that the cap for other related expenses should be calculated separately for each project. For enterprises with multiple R&D projects, some projects may have other related expenses less than 10% while others exceed 10%, and the caps of different projects cannot be used interchangeably. To further reduce the burden on enterprises and facilitate calculation, and to allow enterprises to enjoy more preferential treatment, the "Announcement" adjusts the calculation method of the cap for other related expenses to a unified calculation across all projects, rather than calculating per project.

Example: Assume that a company has two R&D projects, A and B, in 2021. For Project A, the sum of five categories of expenses such as personnel and labor is 900,000 yuan, and other related expenses are 120,000 yuan. For Project B, the sum of five categories is 1,000,000 yuan, and other related expenses are 80,000 yuan.

(1) According to the calculation method of Announcement 97

The cap for other related expenses of Project A is 100,000 yuan [90*10%/(1-10%)], and according to the principle of the smaller amount, the deductible other related expenses are 100,000 yuan. The cap for Project B is 111,100 yuan [100*10%/(1-10%)], and according to the principle of the smaller amount, the deductible other related expenses are 80,000 yuan. The total deductible other related expenses for the two projects are 180,000 yuan.

(2) According to the calculation method specified in the "Announcement"

The cap for other related expenses for both projects is 211,100 yuan [(90+100)*10%/(1-10%)], and the deductible other related expenses are 200,000 yuan (120,000+80,000), which is greater than 180,000 yuan, and only requires one calculation, reducing the workload.

Link: "Announcement of the State Administration of Taxation on Further Implementing the Policy for Additional Deduction of R&D Expenses" (Announcement of the State Administration of Taxation [2021] No. 28)

Source:

State Administration of Taxation