On June 27, 2024, the General Offices of the Ministry of Industry and Information Technology (MIIT), Ministry of Finance (MoF), and State Taxation Administration (STA) jointly issued a Notice on Determining the List of Advanced Manufacturing Enterprises Eligible for the Value-added Tax (VAT) Deduction Policy in 2024 (hereinafter referred to as the Notice). This notice complements the former Announcement on the VAT Deduction Policy for Advanced Manufacturing Enterprises (hereinafter referred to as the Announcement) that allows advanced manufacturing enterprises to reduce the amount of VAT payable by an additional 5% based on the current deductible input tax (hereinafter referred to as the additional VAT deduction policy). 

The Notice outlines specific criteria and procedures for determining eligible enterprises. The Key takeaways of the Notice are summarized as below:

I. Background:

The additional VAT deduction policy was implemented for the first time on April 1, 2019, and applies to taxpayers in production and household services. The release of Announcement released in 2023 expands application scope of the preferential policy, which was originally exclusive to the service industry, to a wider range of industries. As a supporting document, the Notice comprises 8 key articles defining the policy basis for the advanced enterprise list, criteria for inclusion, application timelines, validity period, considerations for branch offices, responsibilities of local authorities, considerations for major changes of the enterprises, and integrity requirements.

II. Scope of Potential Candidates:

- Qualification as High-Tech Enterprises: Advanced Manufacturing Enterprises refer to general high-tech taxpayers (enterprises) in the field of manufacturing industry, including their non-corporate branch offices. High-tech enterprises are defined as per the Notice on Revisions to the Administration Measures for the Identification of High-Tech Enterprises, focusing on high-tech sectors supported by the state.

- Potential candidates must demonstrate that at least 50% of their total sales from January 1, 2023, to December 31, 2023, stem from manufacturing operations, excluding VAT from total and manufacturing sales.

III. Application Time Frame and Platform:

-  Time Frame:

• Enterprises listed in the List of Advanced Manufacturing Enterprises Enjoying VAT Additional Deduction Policy in 2023 with valid high-tech enterprise status can apply for 2024 listing from July 1, 2024, to April 10, 2025.

• New applicants for the 2024 list can apply from September 1, 2024, to April 10, 2025.

-  Platform: Applications must be submitted via the High-Tech Enterprise Identification Management Website (http://www.innocom.gov.cn/).

IV. Validity of Preferential Policy:

-  Enterprises with valid high-tech enterprise status throughout 2024 will enjoy the policy from January 1, 2024, to April 30, 2025.

-  Enterprises whose high-tech enterprise status expires in 2024 and do not renew it within the year will enjoy the policy from January 1, 2024, to December 31, 2024.

-  Enterprises whose high-tech enterprise status expires in 2024 but renew it within the same year will enjoy the policy from January 1, 2024, to April 30, 2025.

-  Newly recognized high-tech enterprises in 2024 will enjoy the policy from January 1, 2024, to April 30, 2025.

The preferential tax policies may benefit the foreign stakeholders that are legally registered in China. Therefore, they are encouraged to carefully review relevant documents and policies to determine if they fall within the application scope of these preferential tax policies.

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