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China Notice on Continued VAT Exemption for Domestic R&D Equipment — Orbitax Tax News & Alerts

China's Ministry of Finance, Ministry of Commerce, and State Administration of Taxation have published Notice 121/2016 on the continued value added tax (VAT) exemption for domestic research and development (R&D) equipment purchased by R&D institutions. The exemption applies from 1 January 2016 to 31 December 2018 for approved domestic R&D institutions and foreign-funded R&D centers, subject to certain conditions.

For foreign-funded R&D centers, specific conditions for the VAT exemption depend on when the R&D center was established:

  • For R&D centers established on or before 30 September 2009, the following conditions apply:
    • Total investment of at least USD 5 million, and annual R&D expenses of at least CNY 10 million;
    • At least 90 full-time research and development personnel; and
    • Total equipment purchases of at least CNY 10 million since the establishment of the center.
  • For R&D centers established after 30 September 2009, the following conditions apply:
    • Total investment of at least USD 8 million (no annual expense condition);
    • At least 150 full-time research and development personnel; and
    • Total equipment purchases of at least CNY 20 million since the establishment of the center.

Before the exemption can apply, the R&D center must be examined and approved by the competent authority as to whether the conditions are met.

Click the following link for Notice 121/2016 (Chinese language), which replaces the previous notice on the exemption, Notice 88/2011.