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China Research & Development Tax Services An Opportunity for Tax Savings www.pwccn.com
China Research &Development TaxServices
An Opportunityfor Tax Savings
www.pwccn.com
PwC 1
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
15%
HNTE
For HNTE(“High and New TechnologyEnterprise”)Corporate Income Tax (CIT) Rateis 15%
150%
Super Deduction
R&D expense150% eligible R&D expensescould 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 millionor
Tax saving (HNTE CIT rate of 15%) = 7.5 million
Moneysaved
10,000,000Moneysaved
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%; Personnelengaged in R&D activities > 10%
3. Engage in qualified R&D activities and incur relevantR&D expenses
4. IP registration or licensing requirements
5. HNT products revenue > 60% of the total revenue ofthe enterprise in the year of application
6. Obtain score of more than 70 in indicatorrequirement assessment
R&D expense super deduction Criteria
1. Resident enterprise
2. R&D activities fit into HNT Area orencouraged key areas
3. Setting separate expense account
4. Can accurately record the R&D expenses
PwC 2
Contributing to your success
PwC’s China R&D Tax Services professionals have thefinest cross-disciplinary credentials. Our team ofengineers, scientists, accountants and tax practitionershas exactly the expertise required to understand theissues and challenges you are facing, and to matchyour needs relating to R&D tax benefits.
Yourengineering /
technicalgroup
Yourtax andaccountinggroup
ChinaTax/S&T
authorities
PwC R&DTax
Servicesgroup
Industry expertise
The PwC R&D Tax Services team has experienceworking 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
Leveraging on PwC global methodologies and best practices
PwC’s Global R&D Tax Services Networkcombines deep technical expertise, localknowledge, and global perspective toprovide our clients with an unrivalled service.We have already built up the globalcooperation with our offices located at:
• US
• Canada
• Australia
• UK
• Germany
• France
PwC 3
The PwC R&D Tax Services advantage
Using a proven proprietary methodology, we add value to increase your tax benefit and reduce the demandson your time and resources. We give you:
PwC R&D TaxServices
advantage
Finance/tax/technicalprofessional
Extensiveindustryexperience
Multilingualservice team
Work toyourschedule
Proprietarymethodology
Flexibleserviceoptions
Strategicconsulting
One-stopservice shop
Tax riskcontrol andmitigation
Auditdefensesupport
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
PwC 4
R&D expense super deduction related services
Analyzing the eligibility issues in China, including the nature of expenses incurred,reporting and record keeping, IP ownership, potential intra-group recharges anddetermining the claimable potential R&D expenses. Reviewing the prepared applicationpackage based on our analysis results.
Review on application package for R&D super deduction
Identifying the R&D expenses that are eligible for the R&D Expenditure SuperDeduction and working with client to assist in the preparation of R&D ExpenditureSuper Deduction claim, including internal documentation review, preparation,completion and submission of the “Assessment Forms” , and preparation R&Dnumbers in CIT returns.
Documents preparation and R&D super deduction application
Providing R&D assessment and assistance of establishing R&D expenditure trackingsystem, including develop a R&D activity mapping, prepare a R&D activity andprocedural manual, establish a cross-departmental/cost centres R&D expense trackingsystem, provide training to employees concerned, etc
R&D expenditure tracking system establishment
Providing assistance in respect of queries and/or audits from the science andtechnology administration authorities and/or the China tax authorities in relation to theR&D expenditure super deduction claims notwithstanding the claim may havepreviously been lodged during the annual CIT filing.
R&D super deduction related audit defense service
PwC 5
HNTE related service
Assisting the client to analyze whether the client qualifies for the HNTE criteria:Revenue, Proprietary IP, Qualifying products or services, Technical personnelrequirement, R&D expenditure requirement and other indicator requirement, andreviewing the prepared application package based on our analysis results.
Review on HNTE application package
Performing full scope HNTE review, including identifying the gaps between realsituation and regulation requirements, providing assistance in remediation strategyformulation (if necessary), assistance in documents preparation, and negotiate withrelevant Chinese government authorities during application process (where applicableand if required).
Documents preparation and HNTE application /re-application
Assisting the clients to analyze whether the client qualifies for the 6 required HNTEcriteria annually after they obtained the HNTE qualification, and providing assistance inremediation strategy formulation (if necessary), to seek possibilities for the client toenjoy the 15% preferential CIT rate.
Annual review on HNTE qualification
Assisting the client to analyse whether the client qualifies for R&D expense criteria forHNTE application/re-application purposes, and provide assistance in remediationstrategy formulation (if necessary).
R&D expenses review for HNTE application purposes
Clarifying motivations behind a tax audit, identifying key audit auditors, providingtechnical support, presenting positive arguments, providing assistance in respect ofqueries and/or audits from authorities.
HNTE related audit defense service
PwC
Roger Di
Partner
China R&D Tax ServicesMarket Leader
Tel: + 86 (10) 6533 2268
Contact us
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China & Hong Kong
North China Central China South China
Roger Di
Partner
Tel: + 86 (10) 6533 2268
Liang Gong
Partner
Tel: + 86 (21) 2323 3824
Daisy Kwun
Partner
Tel: + 86 (20) 3819 2338
Hong Kong
Kevin Huang
Director
Tel: + 86 (755) 8261 8239
Director
Tel: + 86 (852) 2289 5610
This content is for general information purposes only, and should notbe used as a substitute for consultation with professional advisors.
© 2015 PricewaterhouseCoopers Consultants (Shenzhen) Limited. Allrights reserved. PwC refers to the China member firm, and maysometimes refer to the PwC network. Each member firm is a separatelegal entity. Please see www.pwc.com/structure for further details.
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