City sees a rapid growth in its R&D investment in the last 2 years
In the past few years,Cities of Shenzhen, Foshan, Dongguan introduced a series of favorable policies to stimulate local enterprises in investing R&D initiatives, including the Measures of Shenzhen Municipality for the Administration of Funding for Enterprise Research and Development Projects and High-tech Enterprise Cultivation Projects and Foshan High-tech Enterprise Quality Improvement Action Plan, detailing financial incentive for corresponding enterprises that invest in R&D. For example, it is estimated that Shenzhen would nearly spend 4 billion yuan on such an incentive scheme.
To implement the pro-innovation 12 measures introduced by Guangdong provincial government, Huizhou introduced theSeveral Measures in Accelerating Scientific and Technological Innovation (hereafter referred to as the 20 Innovation Measures) in December 2019. One of the highlights of the 20 Innovation Measures is to increase the incentive amount for innovative SMEs, in other words, scientific and technological SMEs with their independent research facilities allowed to access, on top of the 75% pre-tax deduction for research and development expenses as stipulated in the state-level policy, a financial incentive equal to 25% pre-tax deduction for research and development expenses, with the amount no more than 100,000 yuan per enterprise.
Thanks to the introduction of this favorable policy, enterprises in Huizhou have increased their investment in R&D significantly. In 2019 the R&D expenses in Huizhou reached 10.935 billion yuan, accounting for 2.62% of Huizhou’s GDP and with a year-on-year increase of 0.32%. The average monthly R&D expense by Huizhou enterprises in the first three quarters of 2020 reached 9.65 billion yuan, a year-on-year increase of 21%.
In December 2020, Huizhou officially introduced theHigh-quality Implementation Plan of Huizhou City in Cultivating High-tech Enterprises, stipulating clearly that Huizhou would increase the incentive amount to eligible innovation enterprises. For those eligible innovation enterprises above designated scale, that have set up their own research facilities and declared scientific and technological statistics truthfully, will be allowed to claim financial incentives to cover their R&D expenses, up to 500,000 yuan per enterprise.
Favorable policies boost the confidence of enterprises
According to a senior official from Huizhou Science and Technology Bureau, “Huizhou has provided financial incentives to over 582 enterprises in 2020, with the total amount exceeding 25.25 million yuan”. In line with the incentive distribution rules, three data, namely the amount of the special audit report on research and development expenses, the amount of feedback from the statistical department and the amount of feedback from the tax department, would be carefully analyzed and the lowest amount would be treated as the actual amount of R&D expense to apply for the financial incentive; while for the R&D expense amount below 10 million yuan, the incentive ratio is equal to 5‰ of the total expense; for the expense exceeds 10 million yuan, the ratio is 5‰, while if the amount exceeds 100 million yuan, the incentive will be set as 500,000 yuan at the highest.
According to the same official from Huizhou Science and Technology Bureau, “The incentive scheme is a concrete action by Huizhou municipal government in implementing the 20 Innovation Measures. It is an ex-post incentive distribution plan, and local government will only incentivize enterprises that have already invested heavily on R&D. This policy works effectively and is a tested experience from those well-developed regions.” In 2020, Huizhou succeeded in delivering government promise and stimulating enterprises’ investments in R&D without adding any extra fiscal budget. Huizhou now plans to set up a special fund to guarantee the provision of innovation incentives for scientific and technological enterprises in the year 2021.
Despite its relatively small amount, Huizhou’s incentive scheme proved to work effectively in increasing enterprise confidence amidst the epidemic and complicated external trading environment. According to Mr. Zhang Yuwen, General Manager of Huizhou Aonuo Technology Co., Ltd, any enterprise that wants to survive the fierce competition must increase its investment on R&D and promote innovation, and Huizhou’s pro-innovation incentive scheme does work well to enhance enterprise confidence.
Reported by: LIU Haowei, ZHONG Canyun, GUAN Suxia