Announcement of the Ministry of Finance, the Ministry of Commerce, and the State Taxation Administration on the Value-Added Tax Policy for Equipment Purchases by R&D Institutions

Announcement No. 41 of 2023 by the Ministry of Finance, the Ministry of Commerce, and the State Taxation Administration

To encourage scientific research and technological development and to promote advances in science and technology, the value-added tax on the full purchase of domestically produced equipment by domestic R&D institutions and foreign-invested R&D centers will continue to be refunded. The relevant matters are hereby announced as follows:

I. Domestic-funded R&D institutions and foreign-invested R&D centers that are eligible for the policy of full VAT refund on domestically produced equipment include:

(1) Institutions that, during the process of reforming the science and technology system, have been restructured into enterprises or have entered enterprises and are primarily engaged in scientific research and technological development, as approved by the Ministry of Science and Technology in conjunction with the Ministry of Finance, the General Administration of Customs, and the State Taxation Administration;

(2) National Engineering Research Centers approved by the National Development and Reform Commission in conjunction with the Ministry of Finance, the General Administration of Customs, and the State Taxation Administration;

(3) Enterprise technology centers approved by the National Development and Reform Commission in conjunction with the Ministry of Finance, the General Administration of Customs, the State Taxation Administration, and the Ministry of Science and Technology;

(4) National Key Laboratories (including enterprise‑based National Key Laboratories) and National Engineering Technology Research Centers approved by the Ministry of Science and Technology in conjunction with the Ministry of Finance, the General Administration of Customs, and the State Taxation Administration;

(5) All types of research institutes engaged in scientific research that are affiliated with State Council ministries and directly subordinate institutions, as approved by the Ministry of Science and Technology, as well as all types of research institutes under the jurisdiction of the science and technology authorities of provinces, autonomous regions, municipalities directly under the central government, and cities separately listed in the national plan, which are engaged in scientific research and have been approved by the respective local government’s science and technology administrative departments;

(6) Science and technology private non‑enterprise entities approved by the Ministry of Science and Technology in conjunction with the Ministry of Civil Affairs, or by the science and technology authorities of provinces, autonomous regions, municipalities directly under the central government, cities separately listed for planning purposes, and the Xinjiang Production and Construction Corps, in coordination with their respective civil affairs departments.

(7) National demonstration platforms for public services to small and medium-sized enterprises (technology‑related), as approved by the Ministry of Industry and Information Technology in coordination with the Ministry of Finance, the General Administration of Customs, and the State Taxation Administration;

(8) Higher education institutions that offer associate‑degree and above programs and whose qualifications are recognized by the state (as listed on the website of the Ministry of Education);

(9) Foreign-invested R&D centers that meet the requirements set forth in Article 2 of this Announcement;

(10) Other scientific research institutions, technological development institutions, and schools as approved by the Ministry of Finance in conjunction with the relevant departments of the State Council.

II. Foreign-invested R&D centers shall simultaneously meet the following conditions:

(1) R&D Expenditure Standards: For entities established as independent legal persons, the total investment shall be no less than USD 8 million; for non‑independent legal entities operating as internal departments or branches of a company, the total R&D expenditure shall be no less than USD 8 million.

(2) The number of full-time research and development personnel shall be no fewer than 80.

(3) The aggregate original cost of equipment acquired since establishment shall be no less than RMB 20 million.

Foreign-invested R&D centers shall undergo qualification review and certification by the competent commerce authorities in conjunction with relevant departments, in accordance with the aforementioned criteria. The specific procedures for such review and certification are set out in Annex 1.

III. Domestic R&D institutions and foreign‑invested R&D centers that have been duly approved shall be ineligible for the tax rebate policy if they engage in serious tax‑related violations or acts of dishonesty. The specific administrative measures for tax rebates shall be formulated separately by the State Taxation Administration in conjunction with the Ministry of Finance. The competent authorities responsible for approving such R&D institutions shall promptly notify the tax authorities at the same level of the establishment, modification, or cancellation of domestic R&D institutions and foreign‑invested R&D centers, specifying the effective periods of the relevant qualifications.

IV. Definitions Relevant to This Announcement:

(1) The “total investment amount” referred to in this announcement means the amount stated in documents issued or endorsed by the competent commerce authorities, such as the receipt for the foreign-invested enterprise information report, the enterprise approval certificate, or the filing receipt for establishment or amendment.

(2) The “total R&D investment” referred to in this announcement means the assets that a foreign-invested enterprise has specifically allocated for the establishment and construction of this R&D center, including assets that are yet to be acquired but for which purchase contracts have been signed (a list of already purchased assets and a list of contracts for assets to be acquired shall be submitted).

(3) The “annual R&D expenditure” referred to in this announcement means the average annual R&D expenditure over the most recent two fiscal years; if less than two full fiscal years have elapsed, it may be calculated based on the actual R&D expenditure for any consecutive 12-month period since the establishment of the foreign-invested R&D center. Cash and in-kind contributions shall account for no less than 60%.

(4) The “full-time research and experimental development personnel” referred to in this announcement means those among an enterprise’s science and technology personnel who are exclusively engaged in activities related to basic research, applied research, and experimental development. This includes individuals directly involved in the aforementioned three types of projects, as well as relevant full-time scientific and technological management personnel and direct support staff providing materials, documentation, supplies, or equipment for these projects. Such personnel must have entered into a labor contract of one year or longer with the foreign-invested R&D center or the foreign-invested enterprise to which it belongs, and the headcount shall be determined as of the day prior to the submission of the application by the foreign-invested R&D center.

(5) The “equipment” referred to in this Announcement means experimental equipment, apparatus, and instruments that provide the necessary conditions for scientific research, teaching, and technological development. When calculating the aggregate original value of purchased equipment, the original values of both imported equipment and domestically procured equipment shall be included, including equipment for which purchase contracts have been signed and delivery is scheduled within the current year (supporting documentation, such as a list of purchase contracts and delivery deadlines, must be submitted). Such domestically procured equipment must fall within the scope of the “List of Equipment for Technological Development, Scientific Research, and Teaching” set forth in this Announcement (see Annex 2). In cases where there is disagreement regarding the applicability of the domestic‑equipment criteria, the competent tax authority shall submit the matter, through successive levels of review, to the State Taxation Administration for consultation with the Ministry of Finance to determine its eligibility.

V. This Announcement shall be effective until December 31, 2027, and shall take effect from the first day of the month following the month in which domestic-funded R&D institutions and foreign-invested R&D centers obtain eligibility for tax refunds.

This is hereby announced.