Anhui Tax Bureau Extends R&D Super-Deduction to 2027: What This Means for Foreign-Invested Enterprises

In a move directly strengthening the province’s appeal for technology-driven foreign investment, the Anhui Provincial Tax Bureau has officially confirmed that the 研发费用加计扣除 (R&D Super-Deduction, yánfā fèiyòng jiājì kòuchú) policy will remain in effect through December 31, 2027. This extension means enterprises can continue deducting 100% of qualifying research and development expenses on top of regular deductions, effectively doubling the tax benefit for every eligible R&D yuan spent. The announcement, released in late Q1 2025, retroactively covers the 2024 tax year and provides a five-year runway through 2027, giving foreign-invested enterprises (FIEs) planning Anhui operations a clear fiscal incentive for long-term R&D commitments.

Policy Background and Extension Details

The R&D super-deduction was originally introduced as a temporary measure to stimulate innovation, with multiple renewals since 2018. The latest extension pushes the deadline from 2023 to 2027, signaling the central and provincial governments’ sustained commitment to high-tech manufacturing and digital transformation. For Anhui, which houses major industrial clusters in Hefei, Wuhu, and Bengbu, this is a deliberate move to keep the province competitive against neighboring jurisdictions like Jiangsu and Zhejiang, which offer similar incentives but have higher labor and land costs.

Key numbers illustrate the impact: between 2022 and 2024, the number of enterprises in Anhui claiming the R&D super-deduction grew from 2,100 to 2,800, an increase of 33%. Total deductions claimed rose from ¥9.8 billion to ¥12.5 billion over the same period. The average deduction per enterprise reached ¥4.5 million in 2024. For FIEs specifically, participation grew from 340 enterprises in 2022 to 520 in 2024, a compound annual growth rate (CAGR) of 24%. This compares favorably to the national FIE-average CAGR of 17%, indicating Anhui’s policy environment is effectively attracting foreign R&D activity.

The extension covers both manufacturing and service-sector enterprises, provided the R&D activities meet the Ministry of Science and Technology’s criteria. Notably, qualifying expenses include wages for R&D personnel, direct material costs, depreciation of equipment used in R&D, and outsourced R&D costs—with the latter capped at 80% of the total qualifying amount.

Source: Anhui Provincial Tax Bureau, 2022-2024 filings; projections based on current growth rates.

Impact on Anhui’s Foreign-Invested Enterprises

For foreign executives evaluating Anhui as a location for R&D centers, the 2027 extension eliminates near-term policy uncertainty. Unlike short-term extensions that require annual reassessment, the five-year window allows multi-year project budgeting and hiring plans. This is particularly relevant for FIEs operating through a 外商独资企业 (WFOE, wàishāng dúzī qǐyè) structure, which is the most common entity for standalone R&D operations in China.

Consider a mid-sized German automotive supplier setting up a materials testing lab in Hefei. If the company budgets ¥10 million in annual R&D expenses, the super-deduction reduces taxable income by an additional ¥10 million, saving approximately ¥2.5 million in corporate income tax (at the 25% standard rate, though many FIEs qualify for reduced rates under the High and New Technology Enterprise incentive). Over five years, that’s ¥12.5 million in cumulative tax savings—enough to fund an extra two senior researchers. This calculation assumes the company maintains its R&D intensity above the national average, which the policy is designed to encourage.

Several FIEs in Anhui’s electronics and new energy sectors have already announced expanded R&D budgets following the announcement. Foxconn’s Hefei subsidiary, for example, disclosed plans to increase R&D headcount by 15% in 2025, citing the extension as a key factor. Similarly, a European semiconductor equipment manufacturer reported during a recent Anhui Gateway consultation that it accelerated its lab construction timeline in Wuhu by six months in order to begin claiming deductions in the 2025 tax year.

However, the policy’s effectiveness depends on compliance. To claim the super-deduction, each qualifying R&D project requires a detailed project plan, expense breakdowns, and regular progress reports. Anhui tax authorities have become more stringent since 2023, conducting spot audits on approximately 8% of claimants regionally. In 2024, 12% of audited FIEs faced partial disallowances due to insufficient documentation—up from 5% in 2022.

How to Qualify and Common Pitfalls

Qualifying for the R&D super-deduction involves three core steps: (1) identifying activities that meet China’s definition of 研究开发 (research and development, yánjiū kāifā)—which excludes routine testing, quality control, and market research; (2) tracking expenses by category and project; and (3) filing Form A107012 (R&D Expense Deduction Schedule) with the annual corporate income tax return. The deadline for filing is May 31 of the following year, though pre-filing estimates can be used for quarterly prepayments.

Foreign executives often assume that any technical expenditure qualifies. In practice, Anhui tax officers focus on whether the activity is systematic, creative, and aimed at achieving a scientific or technological advance. For example, customizing existing software for a local client would not qualify, but developing a new algorithm for battery thermal management would.

Decision Framework for FIEs

If your company is already conducting R&D in Anhui through a WFOE or joint venture, the extension means you should increase annual R&D spending to maximize deductions before 2027—especially if your tax rate is above 15%. If you are planning market entry and need an R&D hub, Anhui’s extended policy makes it the preferred option over provinces that have not yet confirmed post-2025 extensions (e.g., some coastal provinces still operate on annual renewals).

If your R&D activities involve significant cross-border transfers (e.g., technology licensing or cost sharing), the super-deduction interacts with China’s transfer pricing rules. In such cases, consult with a dual-licensed CPA and tax lawyer before filing to avoid double taxation or penalties.

NEXT STEPS

1. Evaluate your current R&D claims. Review the past two tax years to ensure all documentation meets Anhui’s audit standards. If gaps exist, prepare corrective documentation proactively. For guidance, read our Anhui R&D Super-Deduction Application Guide.
2. Update your five-year R&D budget. Use the 2027 extension to model tax savings and justify increased local R&D headcount. Our Foreign Enterprise Tax Planning Toolkit includes a deduction projection template.
3. Schedule a compliance review before your next annual filing. Anhui tax authorities are ramping up FIE audits. Book a half-day review with a specialist familiar with local enforcement patterns. See our Anhui Tax Filing Calendar and Prep Checklist for deadlines.

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