VAT Rebate Tax Policy for China-Based R&D Institutions

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Nov. 10 – The Ministry of Finance, General Administration of Customs and the State Administration of Tax have jointly issued Circular Caishui (2009) 115, which details the eligibility of tax exemption of imported equipment for foreign-funded research and development centers in China.

R&D centers that qualify may obtain VAT refunds for the purchase of equipment that was manufactured domestically in China – known as a “DME VAT refund.”

The circular differentiates between R&D centers established before or after September 30, 2009. Different qualifying criteria apply to these, including the minimum threshold of R&D expenditure, the number of R&D employees, and the accumulated cost of equipment purchased since establishment.

Domestic or foreign-invested R&D centers qualifying for DME VAT refunds include designated scientific and technological institutions, universities and colleges, and foreign-invested R&D centers qualifying for import tax exemption on equipment. The equipment must be pertinent to “experimental research, fittings and appliances which are necessary for scientific research, education and technological development.”

Foreign-invested enterprises with R&D centers may wish to evaluate their tax position and VAT refund capabilities in regard to this circular.

For more information about China’s tax regulations, please email Sabrina Zhang, the national tax partner for Dezan Shira & Associates, at

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Foreign Invested R&D Centers Exempt From Import Taxes