Que Shan Taxation: Supporting the Compliance and Healthy Development of “Specialized, Fine, Distinctive, and Innovative” Enterprises

Elephant News Reporter   Hu Junfeng   Correspondent Liu Yuanyuan   Zhang Qimei

Compliant operations are not only the foundation for a company's steady development but also the key to winning market trust and building core competitiveness. To establish a new compliance defense line for "specialized, refined, distinctive, and innovative" enterprises, the Queshan County Tax Bureau conducted an in-depth visit to Henan Valiant Braking System Corporation—the 2024 "specialized, refined, distinctive, and innovative" enterprise in Henan Province. By constructing a three-dimensional aggregation model encompassing "projects, personnel, and equipment," the bureau provides precise guidance for compliant accounting of R&D expenses, leveraging tax expertise to fortify the company's risk prevention and control barrier.

Accurately empowering with 3D models to build a “full-chain” R&D compliance framework.  

In the production workshop of Henan Valiant Braking System Corporation, 20 intelligent production lines are operating at full speed. The special alloy materials produced by the company are being shipped one after another to equipment manufacturing giants such as Sany Heavy Industry and China National Heavy Duty Truck Group. As for... “Specialized, Fine, and New” enterprises, Over the past three years, the company has cumulatively invested 36.52 million yuan in R&D. However, the complex process of accumulating R&D expenses has become a major obstacle to the company’s application for tax incentives. “We’re simultaneously pursuing 19 R&D projects, each spanning up to two years. Expenses such as labor costs, material costs, and equipment depreciation are intricately intertwined, leaving our finance staff frequently overwhelmed and exhausted,” admitted Fan Huiqiang, the company’s financial manager.

In response to the challenges faced by enterprise development, the Tax Bureau of Queshan County has established a core business service team to help enterprises build a three-dimensional aggregation model encompassing “projects, personnel, and equipment.” By adopting a comprehensive approach that integrates “digital ledgers, dynamic monitoring, and performance analysis,” the bureau achieves end-to-end, transparent management of R&D expense aggregation, providing enterprises with operational guidelines for standardized accounting. At the project level, through precise classification and positioning of projects, the scope of R&D expense aggregation is clearly defined, ensuring that every expenditure related to R&D projects is accurately accounted for. At the personnel level, by maintaining a personnel ledger that records the involvement of R&D staff in various projects, the bureau can accurately calculate labor costs associated with R&D personnel and appropriately allocate expenses for R&D staff training and incentives. At the equipment level, based on the intended use and frequency of equipment utilization, the bureau reasonably distinguishes between R&D equipment and non-R&D equipment, accurately calculating depreciation and maintenance costs for R&D equipment, and strengthening dynamic monitoring and management of R&D equipment expenses.

Proactively deploy targeted services to weave a tighter “safety net” for risk prevention and control.

The core of compliance management lies in "treating diseases before they occur." The Tax Bureau of Queshan County has broken away from the traditional "post-event supervision" model and is providing enterprises with a full-chain service tailored specifically for them—comprising "policy profiling, risk alerts, and personalized guidance"—thus shifting compliance management from "passive rectification" to "proactive prevention."

The service team used tax big data to screen companies’申报 data from the past three years, identifying five categories of potential risk areas—including the aggregation of R&D expenses and the maintenance of high-tech enterprise qualifications—and established a dynamic monitoring indicator system based on the risk management platform. This system provides real-time alerts for more than 10 key indicators, such as abnormal deductions for R&D expenses and wages, unusual energy consumption, and discrepancies between book records and actual inventory. “The tax authorities helped us identify three instances of historical data discrepancies and adjusted our taxable income upward by over 2.3 million yuan, thereby effectively avoiding tax-related risks,” said Ge Tao, the company’s tax officer, with deep appreciation. “Based on this experience, we’ve established an internal audit mechanism, solidifying the foundation for our company’s compliant development at the institutional level.”

In response to the personalized needs of enterprises, the tax authorities have innovatively launched a “Compliance Check-up Package,” which includes 10 services such as specialized audit guidance on R&D expenses, assessment of policy applicability, and compliance consulting for cross-border transactions. At the same time, the authorities have prepared the “Guidelines for Compliant Handling of R&D Expenses,” identifying six key issues—including ambiguities in the scope of R&D expense accounting and inaccuracies in expense allocation—and providing enterprises with “instruction manual”-style guidance.

Driven by both compliance and innovation, Henan Valiant Braking System Corporation is accelerating its move toward the high end of the industrial chain. In the first quarter of 2025, the company’s R&D investment ratio rose to 3.7%, and it obtained one new invention patent. Recently, the Department of Industry and Information Technology and the Department of Finance of Henan Province jointly released the "Guidance Catalog for the Promotion and Application of First (Set) Major Technical Equipment in Henan Province (2025 Edition)." The bimetallic composite brake disc produced by Henan Valiant Braking System Corporation was included in the catalog, marking a breakthrough from zero for Shangcai County in the field of major technical equipment.

The Shangcheng County Tax Bureau has deeply integrated tax administration into the innovation chains of enterprises, not only effectively resolving the long-standing challenge of accounting for R&D expenses but also forging a distinctive path that leverages institutional innovation to support technological innovation. Currently, the bureau is rolling out Henan Valiant’s experience to more than 10 “specialized, refined, distinctive, and innovative” enterprises across the county and, in collaboration with departments such as industry and commerce and science and technology, is establishing a “Compliance and Innovation Alliance” and launching a compliance capability enhancement program. Guided by the innovation-driven development strategy, the “specialized, refined, distinctive, and innovative” enterprises in Shangcheng County are now accelerating their progress on the track of high-quality development, taking compliance as their foundation and innovation as their wings.

Editor-in-charge: Hu Junfeng

Article reprinted from Elephant News