Three authorities as the Ministry of Finance ("MOF"), Ministry of Commerce and State Administrative Bureau of Tax have recently issued the Announcement on Circular on Continuing the Implementation of Value-added Tax Policies for the Purchase of Equipment by Research and Development Institutions (the "Announcement").
According to the Announcement, Chinese-funded research and development (R&D) institutions and foreign-invested R&D centers will continue to be entitled to a full refund of value-added tax (VAT) for their purchase of domestically-made equipment.
However, those Chinese-funded R&D institutions and foreign-invested R&D centers will be disqualified for such refunding policy, if their serious tax-related violations and discreditable behavior are found and confirmed.
Meanwhile, the Announcement also requires that a foreign-invested R&D center shall satisfy different conditions regarding the amount of R&D expenditures it has spent, the number of full-time R&D personnel it has employed, and the aggregate original values of all equipment it has purchased since its establishment, depending on the time of its establishment.
- Those established on or prior to September 30, 2009 shall satisfy all of the following conditions simultaneously:
(1) Standards for research and development costs: A. for those existing as independent legal persons, the total investment shall not be less than USD5 million; for those existing as non-independent legal persons (such as internal departments or branches of any companies), the total investment in research and development shall not be less than USD5 million; and B. their annual expenditures for research and development costs shall not be less than CNY10 million.
(2) The number of their full-time personnel for research and experimental development shall not be less than 90.
(3) The accumulated original value of equipment purchased as from the dates of establishment shall not be less than CNY10 million. - Those established on or after October 1, 2009 shall satisfy all of the following conditions simultaneously:
(1) Standards for research and development costs: for those existing as independent legal persons, the total investment shall not be less than USD8 million; for those existing as non-independent legal persons (such as internal departments or branches of any companies), the total investment in research and development shall not be less than USD8 million.
(2) The number of their full-time personnel for research and experimental development shall not be less than 150.
(3) The accumulative original value of equipment purchased as from the dates of establishment shall not be less than CNY20 million.
The Announcement notes that the VAT refund policy should be effective retrospectively from January 1, 2019 till December 31, 2020, adding that specifically, the refund policy should become applicable to a Chinese-invested R&D institution or a foreign-invested R&D center from the first day of the month next to the month when it gets the refund qualification.
If you want to read the complete article, you can refer to the below link (in Chinese only). http://www1.shanghaiinvest.com/cn/viewfile.php?id=14276&from=singlemessage&isappinstalled=0
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