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On March 23, the State Taxation Administration issued an announcement on the "Administrative Measures for Value-Added Tax Refunds for the Purchase of Domestic Equipment by R&D Institutions." The announcement stated that to encourage scientific research and technological development and reduce the R&D costs of R&D institutions, with the approval of the State Council, the Ministry of Finance, together with the Ministry of Commerce and the State Taxation Administration, issued Announcement No. 91. This clarifies that from January 1, 2019 to December 31, 2020, the full amount of value-added tax (VAT) will continue to be refunded for the purchase of domestic equipment by R&D institutions (including domestic R&D institutions and foreign-funded R&D centers). The announcement stipulates that specific refund management measures will be formulated by the State Taxation Administration in conjunction with the Ministry of Finance.
The announcement benefits 10 types of R&D institutions and 33 types of instruments and equipment. For a detailed list, please see: List | 33 Types of Instruments and Equipment and 10 Types of R&D Institutions.
The original text of the announcement and its official interpretation are as follows:
State Taxation Administration
Announcement on Issuing the "Administrative Measures for Value-Added Tax Refunds for Domestic Equipment Purchased by R&D Institutions"
State Taxation Administration Announcement No. 6 of 2020
In accordance with the provisions of the "Announcement of the Ministry of Finance, the Ministry of Commerce, and the State Taxation Administration on Continuing to Implement the Value-Added Tax Policy for Equipment Purchased by R&D Institutions" (Announcement No. 91 of 2019), and after consultation with the Ministry of Finance, the State Taxation Administration has formulated the "Administrative Measures for Value-Added Tax Refunds for Domestic Equipment Purchased by R&D Institutions," which is hereby issued. The "Announcement of the State Taxation Administration on Issuing the 'Administrative Measures for Value-Added Tax Refunds for Domestic Equipment Purchased by R&D Institutions'" (Announcement No. 5 of 2017, amended by Announcement No. 31 of 2018) will cease to be effective upon expiration.
This is hereby announced.
State Taxation Administration
March 11, 2020
Administrative Measures for Value-Added Tax Refund on Domestic Equipment Purchased by R&D Institutions
Administrative Measures for Value-Added Tax Refund on Domestic Equipment Purchased by R&D Institutions
Article 1 These Measures are formulated in accordance with the "Announcement of the Ministry of Finance, the Ministry of Commerce, and the State Taxation Administration on Continuing to Implement the Value-Added Tax Policy for Equipment Purchased by R&D Institutions" (Announcement No. 91 of 2019, hereinafter referred to as "Announcement No. 91") to regulate the administration of value-added tax refunds on domestic equipment purchased by R&D institutions.
Article 2 Eligible R&D institutions (hereinafter referred to as "R&D institutions") shall receive a full refund of value-added tax (hereinafter referred to as "domestic equipment purchase tax refund") in accordance with these Measures when purchasing domestic equipment.
Article 3 The specific conditions and scope of R&D institutions and domestic equipment referred to in Article 2 of these Measures shall be implemented in accordance with the provisions of Announcement No. 91.
Article 4 The tax authority in charge of R&D institution tax refunds (hereinafter referred to as "competent tax authority") shall be responsible for handling the filing, review, approval, and subsequent management of R&D institution domestic equipment purchase tax refunds.
Article 5 Research and development institutions eligible for tax refunds on the purchase of domestically produced equipment shall, upon their first tax refund application, submit the following documents to the competent tax authority for tax refund filing:
1) Qualification certificates of the research and development institution as stipulated in Articles 1 and 2 of Announcement No. 91.
2) A truthfully and completely filled-out "Export Tax Refund (Exemption) Filing Form." This form was published in the "Announcement of the State Taxation Administration on Issues Concerning Export Tax Refund (Exemption) Declaration" (Announcement No. 16 of 2018). For "Enterprise Type," select "Other Entities"; for "Export Tax Refund (Exemption) Management Type," fill in "Domestic R&D Institution (abbreviation: Domestic Institution)" or "Foreign-Invested R&D Center (abbreviation: Foreign-Invested Center)" based on the qualification certificates; other columns should be filled in according to the instructions.
3) Other documents required by the competent tax authority.
Research and development institutions that have already filed for tax refunds on the purchase of domestically produced equipment before the issuance of this regulation do not need to file again.
Article 6 If a research and development institution's registration materials are complete, the "Export Tax Refund (Exemption) Registration Form" is filled out correctly, and the signatures and seals are complete, the competent tax authority shall register it. If the registration materials or the content are not correct, the competent tax authority shall inform the research and development institution in one go, and register it after the institution makes corrections.
Article 7 If a research and development institution that has already registered changes the content of its "Export Tax Refund (Exemption) Registration Form," it must, within 30 days from the date of the change, submit relevant materials to the competent tax authority to apply for a change of registration.
Article 8 If a research and development institution is dissolved, bankrupt, revoked, or otherwise legally required to terminate the purchase of domestically produced equipment for tax refund, it shall submit relevant materials to the competent tax authority to apply for withdrawal of registration. The competent tax authority shall process the withdrawal of registration after settling the tax refund in accordance with regulations.
If a research and development institution applies for cancellation of its tax registration, it shall first apply to the competent tax authority to withdraw its tax refund registration.
Article 9 If a foreign-invested R&D center no longer meets the conditions stipulated in Article 2 of Announcement No. 91 due to changes in its own conditions, it shall withdraw its tax refund filing within 30 days from the date of the change in conditions, and cease to enjoy the tax refund policy for the purchase of domestically produced equipment from the date of the change in conditions. Failure to withdraw the tax refund filing as required and continued application for tax refunds for the purchase of domestically produced equipment shall be handled in accordance with Article 19 of these Measures.
Article 10 For the establishment, alteration, or cancellation of an R&D institution, the competent tax authority shall handle the relevant tax refund matters based on the list provided by the leading department that verified the R&D institution and the specified start and end dates of the relevant qualifications.
Article 11 The application period for tax refunds for the purchase of domestically produced equipment by R&D institutions is from the 1st of the month following the date of purchase of the domestically produced equipment (based on the invoice issuance date) to the VAT tax declaration period before April 30th of the following year.
The application period for tax refunds for the purchase of domestically produced equipment by R&D institutions in 2019 has been extended to the VAT tax declaration period before August 31, 2020.
Article 12. Registered R&D institutions shall, within the tax refund application period, submit the following documents to the competent tax authority for processing tax refunds on the purchase of domestically produced equipment:
1) "Application Form for Tax Refund on Purchased Goods for Self-Use". This form was published in the "Announcement of the State Administration of Taxation on Issuing the 'Administrative Measures for Value-Added Tax and Consumption Tax on Exported Goods and Services'" (Announcement No. 24 of 2012). When filling out this form, "Technological Development, Scientific Research, Teaching Equipment" should be written in the remarks column.
2) Contract for the purchase of domestically produced equipment.
3) Special VAT invoice, or ordinary VAT invoice issued between January 1, 2019 and the date of issuance of these Measures (excluding roll invoices within ordinary VAT invoices, the same below).
4) Other documents required by the competent tax authority.
The aforementioned special VAT invoices, after being launched on the VAT invoice integrated service platform, should have had their purpose confirmed as "for export tax refund" through the VAT invoice integrated service platform; before being launched on the VAT invoice integrated service platform, they should have been scanned and authenticated, or selected and confirmed through the VAT invoice selection and confirmation platform.
Article 13 If a research and development institution that is a general VAT taxpayer applies for a tax refund on the purchase of domestically produced equipment, and the competent tax authority verifies that the application meets the requirements, the tax refund shall be processed according to regulations.
If a research and development institution applies for a tax refund on the purchase of domestically produced equipment and falls under any of the following circumstances, the competent tax authority shall conduct an investigation by letter or other means. The tax refund may only be processed after confirming the authenticity of the VAT invoice and that the equipment listed on the invoice has been declared and taxed as required:
1) Suspicion is found during the review, and the suspicion cannot be eliminated after verification.
2) A general VAT taxpayer uses a regular VAT invoice to apply for a tax refund.
3) A non-general VAT taxpayer applies for a tax refund.
Article 14 The tax refundable amount for the purchase of domestically produced equipment by a research and development institution is the tax amount stated on the VAT invoice.
Article 15 If a special VAT invoice obtained by a research and development institution for the purchase of domestically produced equipment has already been used for input tax deduction, a tax refund may not be applied for; if it has already been used for a tax refund, it may not be used for input tax deduction.
Article 16 The competent tax authority shall establish a ledger for tax refunds on domestically produced equipment purchased by R&D institutions, recording the model, invoice issuance date, price, and refunded tax amount of the domestically produced equipment.
Article 17 For domestically produced equipment for which a VAT refund has been processed, if the ownership of the equipment is transferred or used for other purposes within three years from the date of issuance of the VAT invoice, the R&D institution shall pay the refunded tax to the competent tax authority according to the following calculation formula:
Tax payable = Tax amount stated on the VAT invoice × (Equipment residual value ÷ Original value of equipment)
Equipment residual value = Amount stated on the VAT invoice - Accumulated depreciation
Accumulated depreciation shall be calculated in accordance with the relevant provisions of the Enterprise Income Tax Law.
Article 18 If an R&D institution is involved in a major tax violation and breach of trust case, and the information is published in accordance with the "Announcement of the State Taxation Administration on Issuing the 'Measures for Publicizing Information on Major Tax Violations and Breach of Trust Cases'" (Announcement No. 54 of 2018), the R&D institution shall cease enjoying the tax refund policy for the purchase of domestically produced equipment from the date of publication of the case information and withdraw its tax refund filing within 30 days. If information regarding a research and development institution's illegal or dishonest conduct is removed from the bulletin board after publication, the institution may reapply for tax refund registration for the purchase of domestically produced equipment from the date of removal. The purchased domestically produced equipment will continue to be eligible for tax refunds. Failure to withdraw the tax refund registration as required, followed by continued application for tax refunds for the purchase of domestically produced equipment, will be handled in accordance with Article 19 of these Measures.
Article 19: If a research and development institution obtains tax refunds for the purchase of domestically produced equipment by means of fraudulently obtaining such refunds, fabricating domestically produced equipment purchase transactions, applying for both VAT deduction and refund on VAT invoices, or providing false tax refund application materials, the competent tax authority shall recover the refunded tax and handle the matter in accordance with the relevant provisions of the Tax Collection and Administration Law.
Article 20: Other tax refund management matters not explicitly addressed in these Measures shall be handled in accordance with the relevant provisions on export tax refunds.
Article 21: These Measures shall be effective from January 1, 2019 to December 31, 2020, based on the date of issuance of the VAT invoice.
Interpretation of the "Announcement of the State Taxation Administration on Issuing the 'Administrative Measures for Value-Added Tax Refund for Domestic Equipment Purchased by R&D Institutions'"
According to the "Announcement of the Ministry of Finance, the Ministry of Commerce, and the State Taxation Administration on Continuing to Implement the Value-Added Tax Policy for Equipment Purchased by R&D Institutions" (Announcement No. 91 of 2019, hereinafter referred to as Announcement No. 91), the State Taxation Administration has issued the "Administrative Measures for Value-Added Tax Refund for Domestic Equipment Purchased by R&D Institutions" (hereinafter referred to as the "Measures"). The interpretation is as follows:
I. Background of the Issuance of the "Measures"
To encourage scientific research and technological development and reduce the R&D costs of R&D institutions, with the approval of the State Council, the Ministry of Finance, together with the Ministry of Commerce and the State Taxation Administration, issued Announcement No. 91, clarifying that from January 1, 2019 to December 31, 2020, the full amount of value-added tax will continue to be refunded for the purchase of domestic equipment by R&D institutions (including domestic R&D institutions and foreign-funded R&D centers), and stipulating that the specific refund management measures will be formulated by the State Taxation Administration in conjunction with the Ministry of Finance. To implement Announcement No. 91 and facilitate R&D institutions in handling tax refunds for the purchase of domestic equipment, the State Taxation Administration, in consultation with the Ministry of Finance, issued the "Measures."
II. Interpretation of the Main Contents of the Measures
I) Specific Scope of R&D Institutions and Domestically Produced Equipment
The specific scope of R&D institutions and domestically produced equipment eligible for VAT refunds shall be implemented in accordance with Articles 1, 2, and 4 of Announcement No. 91.
II) How R&D Institutions Should File for VAT Refund Registration for Domestically Produced Equipment
R&D institutions eligible for the VAT refund policy for domestically produced equipment should complete the refund registration procedures when applying for VAT refund for the first time. Required documents include R&D institution qualification certificates and the "Export Tax Refund (Exemption) Registration Form." It should be noted that the "Export Tax Refund (Exemption) Registration Form" must be filled out truthfully and completely. For "Enterprise Type," select "Other Units." For "Export Tax Refund (Exemption) Management Type," fill in "Domestic R&D Institution (abbreviation: Domestic Institution)" or "Foreign R&D Center (abbreviation: Foreign Center)" based on the qualification certificates. Other columns should be filled out according to the instructions.
R&D institutions that have already completed the VAT refund registration for domestically produced equipment before the issuance of these Measures do not need to register again.
(III) How R&D Institutions Can Change or Withdraw Their Filing for Tax Refund on Domestically Produced Equipment
1. How to Change the Filing: R&D institutions that have already filed for tax refund must, within 30 days of the change, submit relevant documents to the competent tax authority to change the filing if any changes occur to the information in the "Export Tax Refund (Exemption) Filing Form."
2. How to Withdraw: If an R&D institution is dissolved, bankrupt, revoked, or otherwise legally required to terminate its tax refund for domestically produced equipment, it should submit relevant documents to the competent tax authority to withdraw the filing. The competent tax authority should settle the tax refund amount according to regulations before processing the withdrawal. Foreign-invested R&D centers that no longer meet the eligibility requirements for tax refunds due to changes in their own conditions before the tax refund qualification review should withdraw their tax refund filing within 30 days of the change in conditions.
(IV) How R&D Institutions Apply for Tax Refunds
When applying for tax refunds on domestically produced equipment, R&D institutions need to submit the "Application Form for Tax Refund on Purchased Goods for Self-Use," the contract for the domestically produced equipment, and VAT special invoices or VAT ordinary invoices, etc. The refundable tax amount is the tax amount stated on the VAT invoice.
Specific requirements for the aforementioned VAT invoices: 1. For VAT special invoices, after the VAT invoice integrated service platform is launched, the purpose must have been confirmed as "for export tax refund" through the platform; before the platform's launch, the invoice must have been scanned and authenticated, or confirmed through the VAT invoice selection and confirmation platform. 2. For VAT ordinary invoices, the issuance date must be from January 1, 2019 to the date of this announcement [excluding VAT ordinary invoices (roll invoices)].
VAT special invoices obtained by R&D institutions for purchasing domestically produced equipment, if already used for input tax deduction, are not eligible for a tax refund; if already used for a tax refund, they cannot be used for input tax deduction.
V) Application Deadline for Tax Refund by R&D Institutions
The application deadline for tax refunds for domestically produced equipment purchased by R&D institutions is the VAT tax declaration period from the month following the purchase date to April 30 of the following year. In light of the impact of the COVID-19 pandemic, the deadline for applying for tax refunds on domestically produced equipment purchased in 2019 has been extended to the VAT tax filing period up to August 31, 2020.
If the R&D institution fails to apply for a tax refund within the stipulated period, according to the "Announcement of the Ministry of Finance and the State Taxation Administration on Clarifying VAT Policies for the Leasing of State-Owned Agricultural Land" (Announcement No. 2 of 2020), the refund will be processed after the R&D institution collects all supporting documents.
(VI) How Tax Authorities Review and Process Tax Refunds
If the R&D institution is a general VAT taxpayer, the tax authority should process the tax refund according to regulations after review and verification. If the R&D institution is not a general VAT taxpayer, or although it is a general VAT taxpayer but uses ordinary VAT invoices to apply for a tax refund, the tax authority must confirm the authenticity of the invoice and that the equipment listed on the invoice has been declared and taxed before processing the tax refund.
(VII) How to Handle the Transfer or Use of Domestically Produced Equipment for Which Tax Refunds Have Been Processed
If the ownership of domestically produced equipment for which a VAT refund has been processed is transferred or used for other purposes within 3 years from the date of issuance of the VAT invoice, the R&D institution must pay back the refunded tax to the competent tax authority according to regulations. The payment of the refunded tax is calculated as follows:
Tax Payable = Tax Amount Indicated on the VAT Invoice × (Equipment Residual Value ÷ Original Value of Equipment)
Equipment Residual Value = Amount Indicated on the VAT Invoice - Accumulated Depreciation
Accumulated depreciation is calculated according to the relevant provisions of the Enterprise Income Tax Law.
VIII. Handling of Violations
If a research and development institution fraudulently obtains a VAT refund for the purchase of domestically produced equipment, the competent tax authority shall recover the refunded amount and handle the matter in accordance with the relevant provisions of the Tax Collection and Administration Law. If a research and development institution is involved in a major tax-related violation and its information is publicly disclosed according to law, the institution will be suspended from enjoying the VAT refund policy for the purchase of domestically produced equipment and should promptly withdraw its VAT refund filing.
III. Implementation Period
According to Announcement No. 91, the implementation period of this regulation is from January 1, 2019 to December 31, 2020, based on the date of issuance of the VAT invoice.
