Tax cost is a very important part in the operation of enterprises, and even affects the competitiveness of enterprises to a large extent. Every operator should pay close attention to the tax policy and pay attention to the cost of enterprise tax. As one of the most important subjects of innovation, enterprises' R&D power and capability are particularly important to social development. Tax is one of the most effective means to directly affect the behavior of market subjects, and countries generally guide the behavior of market subjects through tax means. In order to encourage enterprises to increase investment in R&D and effectively promote R&D and innovation activities, the Chinese government has introduced many preferential tax policies to promote enterprise innovation. The preferential tax policy of high-tech enterprise income tax is one of the preferential tax policies of our government to guide enterprises to innovate. Jiao Hanwei, lawyer of Shanghai Guohillan Law Firm, will discuss the identification of high-tech enterprises and the establishment of R&D institutions from the perspective of tax law in combination with practical experience, for reference by operators.

What is a high-tech enterprise?

The so-called high-tech enterprises refer to resident enterprises registered in China (excluding Hong Kong, Macao and Taiwan) for more than one year, which continuously conduct research and development and transform technological achievements in the high-tech fields supported by the State, form the core independent intellectual property rights of enterprises, and carry out business activities on this basis. The high-tech enterprise policy applies only to resident enterprises, that is, enterprises established in China according to law, or enterprises established in accordance with foreign (regional) laws but with actual management institutions in China. If it is established in accordance with the laws of a foreign country (region) and the actual management organization is not in China, but has established an institution or place in China, or has not established an institution or place in China, but has income from China's non-resident enterprises, the high-tech enterprise policy does not apply. According to the corresponding regulations, the technical fields of high-tech enterprises are mainly: electronic information, biology and new medicine, aerospace, new materials, high-tech services, new energy and energy conservation, resources and environment, advanced manufacturing and automation. China's "Enterprise Income Tax Law" stipulates that high-tech enterprises which need key support from the State shall be subject to enterprise income tax at a reduced rate of 15%. This means that once an enterprise is identified as a high-tech enterprise, it will enjoy a preferential tax rate of 15% in terms of enterprise income tax, which is of great significance to the enterprise.

What are the conditions for the identification of high-tech enterprises?

According to the Administrative Measures for the Identification of High-tech Enterprises, enterprises that meet certain conditions can apply for the identification of high-tech enterprises, and then enjoy the preferential income tax policies for high-tech enterprises. Specific conditions are as follows:

1, the enterprise to apply for high-tech enterprise recognition must be registered for more than one year.

2, enterprises registered in China (excluding Hong Kong, Macao, Taiwan), through independent research and development, transfer, donation, merger and acquisition, or through more than 5 years of exclusive license, the core technology of its main products (services) have independent intellectual property rights, and meet one of the following quantitative requirements: A, invention patents, new plant varieties, national new drugs, national crop varieties, national first class Chinese medicine protection varieties, integrated circuit layout design exclusive rights of more than 1; B, more than 8 utility model patents; C. Design patents that do not simply change the product pattern and shape (mainly refers to the design obtained through the research and development process using scientific and engineering technology) or software Copyrights of more than 8.

(3) The technologies that play a core supporting role in the main products (services) of the enterprise belong to the scope stipulated in the Catalogue of High-tech Fields supported by the State.

4. The proportion of scientific and technological personnel engaged in R&D and related technological innovation activities in the total number of employees of the enterprise in the year is not less than 10%.

5. The proportion of the total research and development expenses of the enterprise in the last three fiscal years (calculated according to the actual operating time of less than three years, the same below) to the total sales revenue of the same period meets the following requirements: 1. The proportion of enterprises with sales revenue of less than 50 million yuan (including) in the latest year shall not be less than 5%; 2. The proportion of enterprises with sales revenue of 50 million to 200 million yuan (inclusive) in the latest year is not less than 4%; 3. The proportion of enterprises with sales revenue of more than 200 million yuan in the latest year is not less than 3%. The total R&D expenses incurred by the enterprise in China shall account for not less than 60% of the total R&D expenses; The actual amount of commissioned external research and development expenses shall be determined in accordance with the principle of independent transactions, and 80% of the actual amount shall be included in the total R&D expenses of the principal.

6, in the past year, the proportion of high-tech products (services) revenue accounted for no less than 60% of the total revenue of the enterprise in the same period.

7, the enterprise innovation ability evaluation should meet the corresponding requirements.
8, no major safety, major quality accidents or serious environmental violations occurred within one year before the enterprise applied for high-tech certification.

As far as enterprise operation is concerned, it should carefully verify its own situation and judge whether there are substantive obstacles identified by high-tech enterprises. If there are no substantial obstacles, enterprises should actively apply for the recognition of high-tech enterprises and strive to enjoy the preferential policies of high-tech enterprises given by the international community. If the operating mother does not have the conditions to apply for high-tech enterprises, it can seek the lowest tax cost business plan through reasonable adjustment of the business model and research and development model.

How to set up R&D institutions?

In terms of business operation, the establishment of R&D institutions is a management issue, but also a tax issue. From the perspective of the amount of tax, the setting form of research and development institutions not only relates to the deduction of research and development costs, but also determines to a large extent whether enterprises can enjoy the preferential policy of high-tech enterprise income tax, which is of great significance. Under normal circumstances, research and development institutions have two forms of setting up, one is as an internal department of the enterprise, the other is as an independent legal person set up, which is the mainstream model as an internal part of the company. Because from the perspective of management, the R & D institution as an internal department of the company is convenient for unified management of the business chain; On the other hand, from the perspective of tax costs, R&D institutions, as internal departments of the company, can not only maximize the preferential tax policy of additional deduction of R&D expenses in the operating parent, but also allow the operating parent to enjoy the preferential tax policy of high-tech enterprises if they meet the legal conditions and are identified as high-tech enterprises, so as to greatly reduce the tax cost of the operating parent. In practice, why do some companies set up R&D centers as independent legal entities outside the operating parent? There are usually two considerations: (1) The parent company has substantial obstacles to the identification of high-tech enterprises and does not meet the conditions for the identification of high-tech enterprises. At this time, in order to enjoy the preferential tax policies of high-tech enterprises, the enterprise usually sets the R&D center as an independent legal person and applies for the identification of high-tech enterprises, and then the R&D center as an independent legal person enjoys the preferential tax policies of high-tech enterprises. (2) There are usually multiple operating entities among the operating entities of the group structure. For example, if a multinational group company has multiple factories in China and its independent operating entity does not meet the conditions for recognition as a high-tech enterprise, the group company will consider setting its R&D center as an independent legal person and apply for recognition as a high-tech enterprise. At the same time, the R & D center will be used as a tax planning platform to collect the operating profits of various operating entities, and maximize the preferential tax policies of high-tech enterprises. Of course, this tax planning model will be challenged by related party transactions and other issues, and must be planned within the legal scope. To sum up, from the perspective of tax law, enterprises should pay attention to the setting form of R & D center, but whether the R & D center is set as an independent legal person, or the R & D center is set as an internal department of the enterprise depends on the industry, business model, business purpose, corporate structure and other circumstances of the enterprise, which cannot be generalized.

Innovation is the first driving force for enterprise development. In the market competition, the R&D power and capability of enterprises are particularly important for the development of enterprises. To provide competitiveness, enterprises must increase investment in research and development, and increase investment in research and development needs funds. Research and development institutions are the carrier of enterprise research and development, and enterprises should reasonably set up research and development institutions in the process of operation, maximize the legal use of research and development expenses plus deduction policy and enterprise income tax preferential policy for high-tech enterprises, and reduce tax costs. Every penny of tax cost reduction in accordance with the law means that the enterprise has a penny more competitive resources, and every operator should pay attention to it.

Jiao Hanwei

Chief partner and lawyer of Shanghai Guohillhouse Law Firm

More than 10 years of legal service experience and more than five years of business experience, familiar with law, familiar with business, He is good at providing enterprises with legal counsel, brand management, business compliance, business negotiation, intellectual property management, tax planning, equity transfer, corporate structure design, equity incentive, investment and financing, restructuring and merger, dispute resolution and other solutions for the whole stage of enterprise development from the perspective of law and business operation.