Add, offset and expand! Advanced manufacturing industry welcomes favorable tax reduction

Reporter Zhang Zhi reports from Beijing

In order to effectively reduce the burden on business entities, another preferential tax policy focusing on advanced manufacturing has been implemented recently.

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On September 6, the Ministry of Finance and the State Administration of Taxation issued the Announcement on the Policy of VAT Addition and Deduction for Advanced Manufacturing Enterprises (hereinafter referred to as the Announcement), announcing that from January 1, 2023 to December 31, 2027, advanced manufacturing enterprises are allowed to add 5% of the current deductible input tax to offset the payable VAT.

According to the introduction from the tax department, VAT is the largest tax category in China. The addition and deduction involves the input tax of VAT, which means that taxpayers can deduct part of the input tax based on the deductible input tax in the current period, that is, reduce the amount of VAT payable by enterprises, and help enterprises improve their cash flow and profitability, It is one of the preferential tax policies given to taxpayers by the state to support the development of enterprises.

It is worth noting that prior to this, the policy of allowance and deduction was only applied to taxpayers of producer services and life services, with the proportion of allowance and deduction being 5% and 10% respectively. This is the first time that advanced manufacturing industry has been included in the preferential policy of allowance and deduction.

Zhang Yiqun, vice chairman of the China Financial Budget Performance Special Committee, told the reporter, "We will continue to expand the value-added tax deduction amount for advanced manufacturing enterprises, and add 5% to the existing value-added tax deduction, so as to effectively reduce the burden on enterprises, which will help further enhance the competitiveness of advanced manufacturing, increase independent R&D and innovation capabilities, and accelerate the promotion of China's new technologies The development of high-end industries such as new energy and new materials has been accelerated, and the market competitiveness and international influence of China's advanced manufacturing enterprises have been improved.

Add, offset and expand

According to the Announcement, the advanced manufacturing enterprises shall accrue the current amount of addition and deduction at 5% of the current deductible input tax. The input tax that cannot be deducted from the output tax according to the current regulations shall not be added or deducted; If the input tax that has been accrued plus the amount of deduction is transferred out as the input tax according to the regulations, the amount of additional deduction shall be adjusted and reduced accordingly in the current period when the input tax is transferred out.

If the tax payable before the deduction is equal to zero, the current deductible plus the calculated deduction shall be carried forward to the next deduction; If the amount of tax payable before deduction is greater than zero and greater than the deductible plus deductible amount of the current period, the total amount of deductible plus deductible amount of the current period shall be deducted from the amount of tax payable before deduction; If the amount of tax payable before deduction is greater than zero and less than or equal to the current deductible plus deductible amount, the current deductible plus deductible amount shall be used to deduct the amount of tax payable to zero.

The current deductible plus deductible amount that has not been fully deducted shall be carried forward to the next period for further deduction.

Since the implementation period of this preferential policy dates back to January 1 of this year, the Announcement also makes it clear that the amount of additional credits that can be accrued but not yet accrued by advanced manufacturing enterprises can be accrued together in the current period when it is determined that the additional credit policy is applicable.

It is worth noting that there are some inapplicable conditions for the policy of allowance and deduction.

For example, for advanced manufacturing enterprises exporting goods and services, cross-border taxable behaviors are not applicable to the policy of additional deduction, and the corresponding input tax shall not be accrued. Advanced manufacturing enterprises that meet multiple value-added tax deduction policies at the same time may choose to apply, but shall not apply in the same period.

This is another important measure to promote the innovation of advanced manufacturing enterprises in China, which is equivalent to directly reducing the operating costs of advanced manufacturing enterprises. It is of great help to both profitable enterprises and loss making enterprises.

At present, tax and fee reduction has become an important focus of active fiscal policy.

The data released by the State Administration of Taxation shows that in the first half of the year, 927.9 billion yuan of new tax cuts and tax rebates were added nationwide, effectively reducing the burden on business entities. The manufacturing industry and the related wholesale and retail industry accounted for the highest proportion, with a cumulative increase of 381.8 billion yuan in tax reduction and fee reduction and tax rebate and postponement fees, accounting for 41%.

Tax reduction policy or further increase

The report of the 20th National Congress of the Communist Party of China mentioned that "promoting high-end, intelligent and green manufacturing". The introduction of the tax reduction policy released a positive signal, fully highlighting the importance of the country on advanced manufacturing.

According to the relevant personage of the tax department, in recent years, China has continued to increase tax support for scientific and technological innovation, and implemented a series of targeted tax preferential policies, such as reducing the corporate income tax rate of 15% for high-tech enterprises, implementing the income tax preference for integrated circuit and software enterprises, and increasing the VAT allowance and rebate for advanced manufacturing industries, The investment in technological achievements is taxed by installments or deferred taxes, forming a set of tax preferential policy system that covers a wide range of areas, has a large degree of preference, and covers all aspects of the whole process of enterprise innovation.

According to the forecast, more financial support policies will be issued in the second half of the year.

On September 5, the Ministry of Finance reported that in order to encourage scientific research and technological development and promote scientific and technological progress, the Ministry of Finance, the Ministry of Commerce and the State Administration of Taxation issued an announcement on the policy of value-added tax on equipment purchased by research and development institutions, and continued to refund the full amount of value-added tax on domestic equipment purchased by domestic research and development institutions and foreign-funded research and development centers. The policy will be implemented until December 31, 2027.

However, in the opinion of industry insiders, there is still much room for manoeuvre in the choice of fiscal and tax policies to support the development of advanced manufacturing industry. For example, for key advanced manufacturing industries, some phased tax relief is given, a certain loan discount is given to manufacturing financing, and the development of manufacturing industry is supported through government investment funds.

"For the advanced manufacturing industry, more policies may focus on the appropriate tax reduction, the establishment of government industry development funds, the liberalization of restrictions on private enterprises, the encouragement of large and medium-sized private enterprises to invest in high-end technology industries, and the reduction of individual income tax and corporate income tax on technology transfer and achievement transfer of scientific and technological personnel. These may be phased, thus playing a role in accelerating development." Zhang Yiqun told our reporter.

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