The recognition of R&D activities has always been a focus for various regulatory agencies. According to statistics, approximately30% of enterprises have undergone special audits for R&D expense deductions due to issues with the determination of R&D activities. If a company’s R&D project is not recognized as an R&D activity by the tax authorities, all accumulated R&D expenses for the project will be disallowed, leading to significant losses!
1. Official Cases from the State Administration of Taxation on R&D Activity Recognition
Based on the first batch of R&D project recognition cases launched in 2023, the Department of Policy, Law, and Innovation System Construction of the Ministry of Science and Technology, along with the Income Tax Department of the State Administration of Taxation, has selected and organized three typical cases from expert-verified R&D projects to explain the basis for judgment in detail, helping taxpayers better understand the characteristics of R&D activities and accurately implement the R&D expense deduction policy.
1. Case 1: Laser Particle Sensor
1. Basic Project Information Provided by the Enterprise
(1) Project R&D Goals and Content
The enterprise analyzed that the sensors used for detecting air particulate matter in air monitors and purifiers currently on the domestic market are mainly developed based on infrared scattering methods, which are low-cost but lack accuracy. Although laser-based particulate detection technology can also be used for air quality monitoring, it is primarily used in large instruments and rarely in miniature sensors. Therefore, the goal of developing a miniature laser particle sensor was proposed.
(2) Core Technologies and Innovations the Enterprise Aims to Break Through
The enterprise believes that the core technology of this project is the laser particle sensor technology. The innovations include: first, micro-integration technology through ××, ××, ××, etc.; second, precision measurement technology for particulate matter, using self-calibration and self-compensation techniques to ensure product consistency, and adding ×× devices in the air passage structure to improve measurement accuracy; third, high-precision calibration and testing technology, uniquely creating multi-concentration, multi-parameter, mixed particulate calibration methods, etc.
(3) Achieved Technical Indicators
Through project R&D, the enterprise believes its laser particle sensor has achieved the preset technical indicators in terms of miniaturization, including 9 technical indicators such as DC supply voltage, operating current, standby current, data interface level, operating temperature range, operating humidity range, storage temperature range, mean time between failures, and maximum dimensions; in terms of particulate measurement, it has achieved breakthroughs in 7 technical indicators such as preset measurement range, counting efficiency, effective measurement range of particulate mass concentration (PM2.5 standard value), maximum measurement range of particulate mass concentration (PM2.5 standard value), resolution of particulate mass concentration, consistency of particulate mass concentration (PM2.5 standard value), and calibration volume.
2. Expert Verification Situation
The project requested the science and technology department to organize expert verification, and the experts determined that it belongs to R&D activities. The reasons for the expert judgment are as follows:
(1) The project has a clear innovation goal
The project aims to develop a laser particle sensor with superior performance and low cost, which will fill the gap in the upstream core components and sensor field in the domestic market, while providing core technical support for the intelligentization of household and vehicle-mounted air purifiers, air conditioners, etc.
(2) The project has a systematic organizational form
1. The project was proposed by the R&D department with a feasibility study report, and approved by the authorized department of the enterprise through a project initiation resolution.
2. The project is organized and implemented by the R&D department, with a reasonable, professional, and clearly defined division of labor among personnel from circuit, structure, software, and algorithm design.
3. The existing technical accumulation, technical equipment, and facilities of the enterprise meet the necessary conditions and capabilities for R&D.
(3) R&D results have uncertainty
The project planned the R&D progress from “product design” to “mass production” over a three-year implementation period, conducting necessary tests and improvements at each stage to gradually achieve the expected technical indicators. After the project completion, experts were invited for acceptance and approval.
(4) Supporting Documentation for the Project
The enterprise has successfully applied for a patent for this technology.
In summary: The project initiation is well-founded, the R&D content and goals are clear, and it has certain advanced and innovative technical aspects. The project has been completed and accepted as required, achieving the expected results, and has successfully applied for a patent. Experts verified that this project belongs to R&D activities and is eligible for the R&D expense deduction policy.
Please note that the above verification conclusion is based on the technology level at the time and may change with technological development.
2. Case 3: Integrated Spraying and Surfing Raisin Cleaning Device
1. Basic Project Information Provided by the Enterprise
(1) Project R&D Goals and Content
During raisin processing, manual washing and stirring are typically used for cleaning. The enterprise proposed the R&D goal of an “integrated spraying and surfing raisin cleaning device,” which aims to produce a device that combines spraying and surfing for rapid cleaning of raisins to facilitate subsequent processing and reduce labor input.
(2) Core Technologies and Innovations the Enterprise Aims to Break Through
This project device uses a cleaning tank and cleaning pipe to allow raisins to move with the water flow for surfing-style cleaning; it sets up a spraying tank to spray the raisins, washing away stubborn impurities attached to the surface of the raisins, ensuring thorough cleaning.
(3) Proposed Technical Indicators
No quantitative technical indicators have been set. It is estimated that through project R&D, 1 invention patent and 2 utility model patents will be applied for, and the R&D device will be put into production, with an expected increase in sales revenue of 500,000 yuan.
2. Expert Verification Situation
The project requested the science and technology department to organize expert verification, and the experts judged that the project lacks innovation and does not belong to R&D activities. The main reasons are as follows:
(1) The project goals do not reflect innovation
The integrated spraying and surfing raisin cleaning device project mainly aims to develop a raisin cleaning device, optimizing the cleaning process of raisins to improve batch cleaning efficiency. Currently, there are various methods for cleaning raisins, and this project device is structurally an optimization by adding spraying and spraying tanks (equipped with spray heads, high-pressure nozzles, and high-pressure fans) to an existing surfing-style pump cleaning device, which is a simple combination optimization based on existing technology.
(2) Lack of Documentation for Project Organization and Implementation
The project device has not been sufficiently demonstrated from the perspective of technical implementation paths, only introducing the project initiation report, overall design, and layout, without resolution documents, logs during the equipment R&D process, progress reports, testing records, or specific benefits during implementation, and no quantitative technical indicators were established during the implementation process.
(3) R&D results do not reflect uncertainty
The project device, as a raisin cleaning device, adds processes and combines two cleaning methods on existing equipment, without changing the device’s functionality, and does not reflect the characteristics of uncertainty in R&D results.
In summary: The project lacks innovation and falls under the category of “repeated or simple changes to existing products, services, technologies, materials, or processes” as stated in Article 1, Clause (2) of the “Notice on Improving the Pre-Tax Deduction Policy for R&D Expenses” (Cai Shui [2015] No. 119), and is not considered a qualifying R&D activity, thus not eligible for the R&D expense deduction policy.
2. Definitions of R&D Activities in Accounting Standards, Deductions, and High-tech Recognition
(1) Definition of R&D Activities in Accounting Standards
1. The “Enterprise Accounting Standard No. 6 – Intangible Assets” and its application guidelines (2006 version) define R&D activities as:
|
R&D Stage |
Definition |
Characteristics |
Examples of Related Activities |
|
Research Stage |
A planned investigation aimed at acquiring new scientific or technological knowledge and understanding them through originality. |
The research stage is exploratory, preparing materials and related aspects for further development activities, with significant uncertainty regarding whether the conducted research activities will transition into development and whether the development will result in intangible assets. |
Activities aimed at acquiring knowledge, applied research, evaluation, and final selection of research results or other knowledge, research on materials, equipment, products, process systems, or service alternatives, configuration, design, evaluation, and final selection of new or improved materials, equipment, products, process systems, or service alternatives, etc. |
|
Development Stage |
Applying research results or other knowledge to a plan or design before commercial production or use to produce new or substantially improved materials, devices, products, etc. |
Work completed in the research stage largely meets the basic conditions for forming a new product or new technology. |
Design, construction, and testing of prototypes and models before production or use, design, construction, and operation of trial production facilities that do not have the economic scale for commercial production, etc. |
2. The “Small Enterprise Accounting Standards” do not specifically define R&D activities. According to Article 3, Clause 1 of the “Small Enterprise Accounting Standards”:“Small enterprises implementing the Small Enterprise Accounting Standards can refer to the relevant provisions in the Enterprise Accounting Standards for transactions or matters not specified in this standard,” thus the definition in the Enterprise Accounting Standards can be referenced.
3. The “Enterprise Accounting System” states that research and development activities refer to activities conducted by enterprises to develop new products and new technologies. The purpose of research and development activities is to substantially improve technology, products, and services, transforming scientific research results into reliable quality, feasible costs, and innovative products, materials, devices, processes, and services.
(2) Definition of R&D Activities in the Context of R&D Expense Deductions
1. The Cai Shui [2015] No. 119 document defines enterprise R&D activities. R&D activities refer to systematic activities with clear goals that enterprises continuously engage in to obtain new scientific and technological knowledge, creatively apply new scientific and technological knowledge, or substantially improve technology, products (services), and processes.
The so-called “creative application or substantial improvement” refers to the valuable results achieved through research and development activities in technology, processes, and products (services) that promote technological and process advancements in related industries.
2. The “Guidelines for the Implementation of R&D Expense Deductions (Version 2.0)” state that the judgment of R&D activities should meet the following three requirements:
2.1. Clear Innovation Goals: R&D activities generally have clear innovation goals, such as obtaining new knowledge, new technologies, new processes, new materials, new products, new standards, etc. This can be clarified through the following questions. For example, does the activity aim to explore previously undiscovered phenomena, structures, or relationships? Is there a need to break through existing technological bottlenecks within a certain scope? Are the R&D results unpredictable? If the answer is “yes,” it indicates that the activity has clear innovation goals.
2.2. Systematic Organizational Form: R&D activities are organized in the form of projects or topics, conducted around specific goals, with relatively certain support in terms of personnel, finances, and materials, going through the organizational processes of initiation, implementation, and conclusion, thus having boundaries and being measurable.
2.3. Uncertainty of R&D Results: The results of R&D activities cannot be fully anticipated in advance and must undergo repeated testing and experimentation, possessing significant uncertainty and the possibility of failure.
(3) Definition of R&D Activities in the “High-tech Enterprise Recognition Management Work Guidelines”
Research and development activities refer to activities conducted to obtain new scientific and technological knowledge (excluding social sciences, arts, or humanities), creatively apply new scientific and technological knowledge, or substantially improve technology, products (services), and processes, with clear goals. It does not include routine upgrades of products (services) or direct applications of research results (such as directly adopting new materials, devices, products, services, processes, or knowledge, etc.). The judgment methods for R&D activities are as follows:
|
Serial Number |
Judgment Method |
Connotation |
|
1 |
Industry Standard Judgment Method |
If relevant national departments or nationally (worldwide) recognized industry associations provide parameters (standards) for measuring technological “new knowledge,” “creative application of new scientific and technological knowledge,” or “substantially improved technology, products (services), and processes,” priority should be given to these parameters (standards) to judge whether the projects conducted by enterprises are R&D activities. |
|
2 |
Expert Judgment Method |
If there are no recognized measurement standards for R&D activities in the industry, judgment should be made through industry experts. Obtaining new knowledge, creatively applying new knowledge, and substantial improvements in technology should be recognized as valuable innovative results acknowledged by peers in the industry, promoting technological progress in related industries in the region. |
|
3 |
Goal or Result Determination Method |
When it is difficult to determine whether enterprises have engaged in R&D activities using the industry standard judgment method and expert judgment method, this method should be used as a supplement. Focus on understanding the purpose of R&D activities, innovation, resource investment (budget), and whether final or intermediate results (such as patents or other forms of scientific and technological achievements) have been achieved. |
(4) Summary of Definitions of R&D Activities in Various Policies
Based on the above definitions of R&D activities in various policies, the core content points to activities that involve “acquiring new scientific and technological knowledge from nothing” and “substantially improving existing technologies, products, and processes.” The definition of R&D activities in the context of R&D expense deductions is more comprehensive, specific, and rigorous, with higher compliance requirements, indicating “seven types of non-R&D activities,” “specific R&D activities and non-R&D activities in software,” “three key points for judging R&D activities,” and “boundary explanations between R&D activities and other industrial activities.” Therefore, in practice, it is more prudent, pragmatic, and appropriate to refer to the regulations on R&D activities in the context of R&D expense deductions for accounting, high-tech recognition, and IPO applications.
3. Summary of Key Points for Judging R&D Activities Combined with Practice
|
Key Points for Judging R&D Activities |
Specific Content of Key Points for Judging R&D Activities |
Understanding in Combination with Cases |
|
Clear Innovation Goals |
R&D activities generally have clear innovation goals, such as obtaining new knowledge, new technologies, new processes, new materials, new products, new standards, etc. This can be clarified through the following questions. For example, does the activity aim to explore previously undiscovered phenomena, structures, or relationships? Is there a need to break through existing technological bottlenecks? Are the R&D results unpredictable? If the answer is “yes,” it indicates that the activity has clear innovation goals. |
The technical indicators of R&D activities (or ranges of values) compared to the technical indicators of similar products domestically and internationally are at the leading level in the country. It has industry advancement, not just a breakthrough in the existing technology level of the enterprise. |
|
Systematic Organizational Form |
R&D activities are organized in the form of projects or topics, conducted around specific goals, with relatively certain support in terms of personnel, finances, and materials, going through the organizational processes of initiation, implementation, and conclusion, thus having boundaries and being measurable. |
1. Project initiation has reviews and resolutions. 2. Disclosure of the composition of the R&D project team, with complete professional pathways. 3. The existing R&D foundation of the enterprise, such as technical accumulation, R&D equipment, etc. |
|
Uncertainty of R&D Results |
The results of R&D activities cannot be fully anticipated in advance and must undergo repeated testing and experimentation, possessing significant uncertainty and the possibility of failure. |
Necessary testing, improvement, and enhancement are conducted at each R&D stage, gradually achieving the expected technical indicators through continuous trial and error. The project has been accepted and has applied for relevant patents. |
