The policy regarding additional VAT deductions for advanced manufacturing enterprises is hereby announced as follows:

　　I. From January 1, 2023, to December 31, 2027, advanced manufacturing enterprises are permitted to deduct an additional 5% of their current period’s deductible input VAT from their payable VAT (hereinafter referred to as the “additional deduction policy”).

　　For the purposes of this Announcement, “advanced manufacturing enterprises” refers to general taxpayers in the manufacturing sector that are high-tech enterprises (including their non-legal person branches). “High-tech enterprises” refers to those recognized in accordance with the “Notice of the Ministry of Science and Technology, the Ministry of Finance, and the State Taxation Administration on Revising and Issuing the ‘Measures for the Recognition of High-Tech Enterprises’” (Guokefa Huo [2016] No. 32).The specific list of advanced manufacturing enterprises shall be determined by the departments of industry and information technology of each province, autonomous region, municipality directly under the central government, and city with independent planning status, in conjunction with the science and technology, finance, and tax departments at the same level.

　　II. Advanced manufacturing enterprises shall calculate the current-period additional deduction amount based on 5% of the current-period deductible input tax.Input tax amounts that are not deductible from output tax under current regulations shall not be used to calculate the additional tax deduction; for input tax amounts for which an additional tax deduction has already been calculated, if such amounts are reversed as input tax in accordance with regulations, the additional tax deduction shall be correspondingly reduced in the period when the input tax is reversed.

　　III. After calculating the tax payable under the general tax calculation method in accordance with current regulations (hereinafter referred to as the “tax payable before deduction”), advanced manufacturing enterprises shall apply the additional deduction as follows:

　　1. If the tax payable before deduction is zero, the full amount of the additional deduction available for the current period shall be carried forward to the next period for deduction;

　　2. If the tax liability before deduction is greater than zero and exceeds the additional deduction amount available for the current period, the full amount of the additional deduction available for the current period shall be deducted from the tax liability before deduction;

　　3. If the tax liability before deduction is greater than zero but less than or equal to the additional deduction amount available for the current period, the tax liability shall be reduced to zero using the additional deduction amount available for the current period; any unused portion of the additional deduction amount available for the current period shall be carried forward to the next period for continued deduction.

　　IV. For advanced manufacturing enterprises, any additional deduction amount that is eligible but has not been claimed may be claimed in full during the period in which the additional deduction policy is determined to apply.

　　V. The additional tax deduction policy does not apply to the export of goods and services or cross-border taxable activities by advanced manufacturing enterprises; the input tax corresponding to such activities shall not be eligible for the additional tax deduction.

　　For advanced manufacturing enterprises that also engage in the export of goods and services or cross-border taxable activities and are unable to allocate the input tax amounts for which the additional deduction cannot be claimed, the calculation shall be made according to the following formula:

　　Input tax ineligible for the additional deduction = Total input tax that cannot be allocated in the current period × Sales revenue from exported goods and services and cross-border taxable activities in the current period ÷ Total sales revenue in the current period

　　VI. Advanced manufacturing enterprises shall maintain separate accounts for changes in the accrual, deduction, reduction, and balance of the additional deduction. Any fraudulently obtained application of the additional deduction policy or any falsification of the additional deduction amount shall be handled in accordance with the relevant provisions of the "Tax Collection and Administration Law of the People’s Republic of China" and other applicable regulations.

　　VII. Where an advanced manufacturing enterprise qualifies for multiple VAT additional deduction policies, it may select the most favorable one to apply; however, such policies may not be applied cumulatively within the same period.

　　This is hereby announced.