Inventory of Financial and Tax Policies Supporting the Development of the Instrument Industry in 2023

Fiscal policy is an important regulatory tool of the government, which is conducive to optimizing resource allocation and guiding economic development. In order to support the development of domestic instruments, China has introduced numerous policies, among which fiscal and tax policies reduce instrument enterprise expenditures through tax cuts and fee reductions, guiding enterprises to increase research and development investment and improve innovation capabilities. The financial and tax policies to support the development of the instrument industry in 2023 are reviewed as follows:

Further encourage foreign investment to establish research and development centers

In January 2023, the General Office of the State Council forwarded the "Several Measures to Further Encourage Foreign Investment in Establishing R&D Centers" issued by the Ministry of Commerce and the Ministry of Science and Technology, proposing a total of 16 measures from four aspects: supporting scientific and technological innovation, improving R&D convenience, encouraging the introduction of overseas talents, and enhancing the level of intellectual property protection. This includes implementing tax policies to support technological innovation, supporting localities to optimize the approval process, simplify application materials, and provide more convenience for eligible foreign-funded research and development centers based on their actual conditions.

At the same time, the Catalogue of Industries Encouraging Foreign Investment (2022 Edition) will be officially implemented on January 1, 2023. Among them, there are a total of 19 instrument manufacturing industries, including environmental monitoring instruments, glow discharge mass spectrometers, transmission electron microscopes, high-resolution microscopes, etc. In addition, the specialized equipment manufacturing industry also includes agricultural product quality testing instruments and equipment, soil nutrient analysis instruments, and other instruments.

Further improve the pre tax deduction of research and development expenses

In March 2023, the Ministry of Finance and the State Administration of Taxation jointly issued a notice on further improving the policy of pre tax deduction for research and development expenses, proposing that for research and development expenses actually incurred by enterprises in carrying out research and development activities that have not formed intangible assets and are not included in the current period's profit and loss, on the basis of actual deduction according to regulations, from January 1, 2023, an additional deduction of 100% of the actual amount will be made before tax; For intangible assets formed, from January 1, 2023, they will be amortized before tax at 200% of the cost of intangible assets.

The key to the development of domestic instruments lies in technological innovation, therefore requiring a large amount of research and development investment. The scope of pre tax deduction for R&D expenses includes personnel and labor costs, direct input costs, depreciation costs, intangible asset amortization costs, etc. Through pre tax deduction, the greater the research and development expenses, the greater the discount. This policy further increases support and encourages enterprises to increase their R&D investment, which will contribute to the innovation of domestic instruments.

Strengthening the implementation of financial and tax support policies to promote high-quality development of small and medium-sized enterprises

In August 2023, the Ministry of Finance issued a notice on strengthening the implementation of financial and tax support policies to promote the high-quality development of small and medium-sized enterprises, requiring the central government to continue to support the development of national level specialized, refined, and new "little giant" enterprises through special funds for the development of small and medium-sized enterprises, and requiring local financial departments to quickly allocate funds to guide enterprises to increase innovation investment.

Specialized, refined, and innovative "little giant" enterprises need to meet six major indicators: specialization, refinement, specialization, innovation capability, industrial chain support, and leading product field. Domestic instrument manufacturers that tackle the bottleneck problem of high-end instruments have certain advantages in the recognition of specialized and innovative "little giant" enterprises. Currently, many instrument companies have obtained national level specialized and innovative "little giant" enterprise recognition. Strengthening financial and tax support for specialized and innovative "little giant" enterprises is conducive to promoting the development of leading domestic enterprises and accelerating the domestic substitution of high-end instruments.

Increase the deduction of enterprise income tax on equipment and appliances

In August 2023, the Ministry of Finance and the State Administration of Taxation jointly issued a notice on the policy of deducting enterprise income tax from equipment and appliances, guiding enterprises to increase their investment in equipment and appliances. The announcement proposes that for equipment and appliances newly purchased by enterprises between January 1, 2024 and December 31, 2027, with a unit value not exceeding 5 million yuan, they are allowed to be included in the current cost expenses at once and deducted when calculating taxable income, and depreciation will no longer be calculated annually.

Instruments and equipment are necessary tools for enterprises to carry out technological research and development, and the purchase and depreciation of instruments and equipment are also important parts of enterprise R&D investment. This policy has increased the deduction of relevant corporate income tax for equipment and instruments, which indirectly reduces the research and development burden of instrument enterprises, and is conducive to expanding the demand for instruments and providing a market for instrument enterprises.

R&D institutions purchase domestically produced equipment and receive a full refund of value-added tax

In August 2023, the Ministry of Finance, the Ministry of Commerce, and the State Administration of Taxation jointly issued a notice on the value-added tax policy for R&D institutions purchasing equipment, continuing to fully refund value-added tax for domestic R&D institutions and foreign-funded R&D centers purchasing domestically produced equipment. The announcement specifies the domestic research and development institutions and foreign-funded research and development centers that are eligible for the policy of full refund of value-added tax for the purchase of domestic equipment.

The current market is more inclined towards imported instruments and domestically produced instruments, so it is necessary to improve the competitiveness of domestically produced instruments in various aspects. The full refund of value-added tax for the purchase of domestic equipment has encouraged research and development institutions to purchase domestic equipment, providing an opportunity for domestic instruments to expand their market share. The previously issued "Management Measures for Value added Tax Refund of Domestic Equipment Procurement by R&D Institutions" will be implemented until December 31, 2023, and this time it will be extended to December 31, 2027.