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Large-scale equipment upgrades usher in tax incentives!

On July 17, the Ministry of Finance and the State Administration of Taxation issued the "Announcement on the Corporate Income Tax Policy for Digital and Intelligent Transformation of Special Equipment for Energy Saving, Water Saving, Environmental Protection, and Work Safety" (hereinafter referred to as the "Announcement"), stating that the investment in digital and intelligent transformation of special equipment incurred by enterprises between January 1, 2024 and December 31, 2027, which does not exceed 50% of the original tax base when the special equipment was purchased, can be deducted from the enterprise's tax payable for the year at a rate of 10%. If the tax payable is insufficient to be deducted, it can be carried forward to subsequent years for a maximum of no more than five years.

This "Announcement" is the implementation of the requirement of the "Notice of the State Council on Issuing the Action Plan to Promote Large-Scale Equipment Updates and Consumer Goods Trade-in" in March this year to "increase tax incentives and support for energy-saving, water-saving, environmental protection, and special equipment for safe production". It is also an expansion of the relevant tax incentive policies implemented since 2008.

6 types of situations are included in the support scope

"The investment amount of enterprises in purchasing special equipment for environmental protection, energy and water conservation, safe production, etc. can be tax deducted at a certain proportion" is written into the "Enterprise Income Tax Law". This tax preferential policy has been implemented since January 1, 2008, and the scope of the preferential policy will be expanded in 2024.

According to the provisions of the Announcement, the investment made by enterprises in the digital and intelligent transformation of special equipment between January 1, 2024 and December 31, 2027 can be deducted from the taxable amount at a certain proportion.

Compared with the previously implemented corporate income tax preferential policies for special equipment such as environmental protection, energy conservation and water conservation, and safe production, the "Announcement" mainly expanded the scope of preferential policies to include "investment in digital and intelligent transformation of special equipment."

The "Announcement" clarifies that the so-called digital and intelligent transformation of special equipment refers to the use of information technology and digital technology by enterprises to make technical improvements and optimizations to special equipment, thereby improving the digitalization and intelligence level of the equipment.

The Announcement includes six types of digital and intelligent transformation of special equipment into the scope of tax incentive support:

The first is data collection. By using data collection technologies such as sensing, automatic identification, system reading, and industrial control data analysis, the performance parameters, operating status, and environmental status of special equipment are converted into digital form to achieve monitoring and collection of special equipment information.

The second is data transmission and storage. Using data transmission and management technologies such as network connection, protocol conversion, and data storage, the collected data of special equipment is transmitted and stored, realizing the effective collection of data collected by special equipment.

The third is data analysis. Using data computing and processing, statistical analysis, modeling and simulation and other data analysis technologies, we can deeply analyze the collected special equipment information and realize improvements in special equipment fault diagnosis, predictive maintenance, and optimized operation.

Fourth, intelligent control. By using automation technology and intelligent technology, the monitoring and alarm, dynamic parameter adjustment, feedback control and other functions of special equipment are upgraded to realize intelligent control of special equipment.

Fifth, digital security and protection. By using data encryption, vulnerability scanning, permission control, redundant backup and other data and network security technologies, the data confidentiality and integrity of special equipment are strengthened, and the risk prevention and control capabilities of special equipment data and network security are significantly improved.

Sixth, other digital and intelligent transformation situations stipulated by the financial and taxation authorities of the State Council in conjunction with the science and technology, industry and information technology departments.

Enterprises should formulate transformation plans in advance

The Announcement stipulates that the investment in digital and intelligent transformation of special equipment made by enterprises between January 1, 2024 and December 31, 2027, which does not exceed 50% of the original tax base when the special equipment was purchased, can be deducted from the enterprise's tax payable in the current year at a rate of 10%. If the tax payable is insufficient to be deducted, it can be carried forward to subsequent years for a maximum period of no more than five years.

The corporate income tax payable referred to in the "Announcement" refers to the taxable income of the enterprise in the current year multiplied by the applicable tax rate, minus the tax reduction or exemption amount stipulated in the Corporate Income Tax Law and relevant tax preferential policies.

The transformation investment that enjoys the tax incentives of the Announcement refers to the expenditure incurred by the enterprise in the process of digital and intelligent transformation of special equipment and which forms the fixed asset value of the special equipment, but does not include the value-added tax refunded in accordance with relevant regulations and the costs of transportation, installation and commissioning of special equipment.

According to the regulations, enterprises that enjoy the tax preferential policies stipulated in the "Announcement" should actually use the modified special equipment themselves; they should formulate a digital and intelligent transformation plan for special equipment in advance, or obtain a technology development contract or technical service contract registered by a technology contract recognition and registration agency, and retain relevant materials for future reference; enterprises should separately account for the investment in digital and intelligent transformation of special equipment, and accurately and reasonably collect various expenditures.

The announcement also makes it clear that the investment made by enterprises in the digitalization and intelligent transformation of special equipment using fiscal appropriations cannot be deducted from the enterprise's corporate income tax payable in that year.

Promote large-scale equipment upgrades and consumer product trade-ins to achieve greater results

Since the beginning of this year, promoting large-scale equipment upgrades and trade-in of old consumer goods has been actively promoted as an important measure to accelerate the construction of a new development pattern and promote high-quality development.

In March this year, the State Council issued a notice on the "Action Plan for Promoting Large-Scale Equipment Renewal and Consumer Goods Replacement" requiring greater tax incentives for energy-saving, water-saving, environmental protection, and safety production equipment, and including digital and intelligent transformation in the preferential scope. Four months later, the Ministry of Finance officially issued corresponding support policies.

Before the introduction of this tax preferential policy, the Ministry of Finance also recently implemented a financial subsidy policy for equipment renewal loans, which clearly stated that if the loans issued by banks to business entities meet the conditions for re-loan reimbursement, the central government will subsidize the principal of the bank loans of the business entities by 1 percentage point, and the subsidy period shall not exceed 2 years.

Zhang Deyong, a researcher at the Institute of Finance and Economics of the Chinese Academy of Social Sciences, said in an interview with a reporter that promoting large-scale equipment upgrades and trade-in of old consumer goods will form effective investment, which can quickly play a role in promoting consumption and expanding domestic demand, and achieve an organic combination of expanding domestic demand and deepening supply-side structural reforms.

Promoting large-scale equipment renewal and trade-in of consumer goods is a systematic project. To do this well, we need to make a good policy combination. Recently, the National Development and Reform Commission organized a plenary meeting of the inter-ministerial joint meeting to promote large-scale equipment renewal and trade-in of consumer goods, requiring greater policy support and accelerating the implementation of various types of funds so that "real money" benefits can reach enterprises and consumers directly. Do a good job in the research and development of key equipment and strengthen the guarantee of various factors. Timely track and dispatch to inquire about the results, solve important problems in a targeted manner, and promote large-scale equipment renewal and trade-in of consumer goods to achieve greater results with a spirit of perseverance.

Source: Securities Times official microblog

Statement: All information content of Databao does not constitute investment advice. The stock market is risky and investment should be cautious.

Editor: He Yu

Proofreading: Yang Lilin

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