The finance and tax questions manufacturers ask most

What are the most common risks in a High and New Technology Enterprise review?

Most often a hard threshold is missed or the numbers do not reconcile: the R&D spending ratio over the last three fiscal years, high-tech product income (at least 60%), science and technology staff (at least 10%), and a mismatch between R&D costs as collected for the qualification and as claimed for the super-deduction.

The R&D ratio depends on sales: at least 5% below RMB 50 million, 4% from 50 to 200 million, and 3% above 200 million with domestic R&D at least 60% of all R&D spending (Administrative Measures for the Recognition of High and New Technology Enterprises, Guokefahuo [2016] No. 32).
If a later review finds the conditions are not met, the status is revoked and the tax benefits enjoyed since the non-compliant year are recovered.
R&D costs have to hold up under both the qualification and the super-deduction rules, and the two scopes are not identical.

This page is general information only and is not tax, legal or accounting advice on any particular matter. Policy references reflect the documents in force at the time of writing; how they apply depends on the company's facts and on the local tax authority.

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