Author: Stella Hu
On March 5, China released its most important policy document – the “2022 Government Work Report” – setting out the main economic and development tasks to pursue during the year. Important decisions were made concerning tax incentives programs.
Besides raising the R&D expenses deduction ratio of technology-based small and medium-sized enterprises (TSMEs) from 75% to 100%, the two most important programs for foreign and domestic enterprises aimed at encouraging innovation are:
- The “R&D Super Deduction”: a deduction of R&D expenses for manufacturing enterprises that was raised from 175% to 200% on March 24, 2020, for corporate income tax (CIT).
- The “High and New Technology Enterprise (HNTE) Status”, which allows the reduction of a qualified taxpayer’s applicable CIT rate from the standard 25% to 15%.
China’s rapid technological advances are playing a leading role in contemporary geopolitical competition. China’s total R&D expenditures overtook Japan’s in 2013, becoming the world’s second after the US. Consistent with this fact, China’s annual R&D and technological innovations spending grew to 2.44 trillion yuan ($378 billion) in 2020.
China’s role is particularly notable in its world leadership in 5G wireless networks, one of the most important high-profile technological innovations of 2018. This year China aims to install more than 600.000 5G base stations, according to the top industry regulator, expanding the country’s high-speed mobile network to 2 million working units.
Thanks to this technology all mobile-internet activities, such as mobile payments, shopping, food ordering, etc. are powered. Moreover, China looks to develop new 5G services also in the manufacturing, medical and educational sectors, improving efficiency and quality.
To establish a stable global growth of these sectors, the ministry plans to step up investment in the industry, greater production capacity and support investment and other cooperation by multinational companies.