Essential Guide for Yiwu Business Owners: Can Mold Making and Sampling be Considered as R&D Expenses? Can Non-Technology Companies Also Enjoy Additional Deductions?

In October, from Zone 1 to Zone 5 of the International Trade City in Yiwu, everyone is busy with Christmas and post-New Year orders. The warehouses in Huangyuan and Beixiazhu have never been empty. The factory just finished modifying a storage box for a customer, made a mold, and produced three samples. The accountant, while preparing the third-quarter prepayment, asked, "Can these expenses be considered as R&D expenses?"

This question is quite timely. October is a major prepayment period. If the R&D expenses for the first three quarters are not aggregated now, they will need to be added during the annual settlement next year, and many people do not even keep records of project initiation. Below, we will explain according to the current guidelines of the State Taxation Administration, covering whether these expenses can be counted, who can enjoy the benefits, how much can be saved, and how to report them.

1. First, Distinguish: Which Costs Can Be Counted as R&D Expenses

The policy refers to 'R&D activities,' not all expenditures related to new products. According to the current aggregation criteria, the following categories can be counted:

• Personnel Costs: Wages, salaries, and social insurance contributions for personnel directly engaged in R&D, as well as labor fees for hired R&D personnel
• Direct Inputs: Actual consumption of materials, fuel, and power during the R&D process, costs for intermediate testing and product prototyping, including mold, process equipment development, and manufacturing fees, and the cost of purchasing samples, prototypes, and general testing equipment
• Depreciation Costs: Depreciation of instruments and equipment used in R&D activities
• Amortization of Intangible Assets: Amortization of software, patents, and non-patent technologies used in R&D activities
• New Product Design Fees, New Process Development Fees, Clinical Trial Fees for New Drug Development, etc.
• Other Related Costs: Technical book and data fees, translation fees, expert consultation fees, intellectual property application fees, etc. These combined shall not exceed 10% of the total deductible R&D expenses

Common Exclusions in Yiwu

Conventional upgrades after product mass production, minor process modifications, market research, and after-sales maintenance are not considered R&D. A typical example: if a customer places an order and requests a color change, packaging change, or logo addition, this is called custom production, not R&D.

The judgment standard is actually one sentence: Is there an effort to solve a technical uncertainty, involving planning, testing, possible failure, and modification? If this process exists, there are auxiliary accounts to keep; without this process, fabricated R&D expenses will be exposed upon inspection.

2. Non-Technology Companies Can Also Enjoy the Benefits, but Two Types of Entities in Yiwu Need to Be Distinguished

On October 13, 2026, the Zhejiang Provincial Tax Service's official website reprinted a Xinhua News Agency report, stating very clearly: Additional deductions for R&D expenses are a universal support for resident enterprises and are not limited to high-tech enterprises and technology-based small and medium-sized enterprises. This means that it is not necessary to obtain a high-tech certificate or have a patent first.

However, the policy has set up a negative list of industries, and six industries are not applicable: tobacco manufacturing, accommodation and catering, wholesale and retail, real estate, leasing and business services, and entertainment.

For Yiwu, the differences are very specific:

There is no need to wait for the annual settlement. According to current regulations, when making the advance tax payment declaration in July, enterprises can enjoy the additional deduction for R&D expenses incurred in the first half of the year; and when making the advance tax payment declaration in October, they can enjoy the additional deduction for R&D expenses actually incurred in the first three quarters. The prerequisite is that these expenses can be accurately aggregated and accounted for.

1. Project Initiation: A separate project initiation resolution should be prepared for each project, clearly stating the objectives, duration, participants, and budget. Do not wait until the end of the year to make up for it, as such documents may not withstand scrutiny.
2. Setting Up Auxiliary Accounts: Set up auxiliary accounts according to the R&D projects. There must be a basis for the allocation of personnel hours, and shared equipment must have usage records.
3. Advance Tax Payment Declaration: Fill in the amount of the additional deduction in the declaration form. This year, the declaration form has been adjusted, small-scale taxpayers and enterprises share the same set of declaration forms. Make sure you understand this beforehand to avoid filling in the wrong section.
4. Retention for Inspection: Retain the project initiation documents, auxiliary accounts, cost allocation explanations, and project completion or outcome reports as required. No prior approval is needed; the process follows the principle of "self-assessment, declaration, and retention of documentation for inspection."

We go through these accounts every October. Jinfan (Yiwu) Tax & Finance Management Co., Ltd. has been operating in Yiwu for ten years, handling accounts for the International Trade City, Huangyuan Market, and Beixiazhu. The most common situation is: the factory indeed made molds and samples, but the accountant recorded them all under "manufacturing expenses," only to find out during the annual settlement that a whole year's worth of deductions were missed. If you are unsure about what qualifies, you can call 135 6699 1667 first, read through the project list, and we can give you a rough idea within ten minutes.

V. Frequently Asked Questions

1. Can an enterprise without patents or a high-tech certificate still enjoy the benefits?

Yes. The additional deduction for R&D expenses and the preferential policies for high-tech enterprises are two different sets of policies with different eligibility criteria. No prior qualification is required. As long as there is R&D activity and the costs can be accurately aggregated, the enterprise can apply for the benefit.

2. Does a custom order received by a trading company count as R&D?

First, look at the industry. Wholesale and retail trade are on the negative list and do not qualify. Even if the company has a factory, simply producing according to customer drawings does not constitute R&D activity. There must be a technical plan, experimentation, and improvement processes involved.

3. How should salaries be allocated for R&D personnel who also work on production?

Allocate based on actual working hours, with attendance or working hour records as evidence. Allocating all to R&D carries significant risk, while allocating none means losing out. If it is difficult to distinguish, it is better to be conservative.

4. If a project starts in August, can the additional deduction be enjoyed in the October advance tax payment?

The additional deduction can be enjoyed for R&D expenses actually incurred in the first three quarters, without waiting for the project to end. For projects spanning multiple years, report the expenses incurred in the current year, without waiting for completion.

5. Is prior approval from the tax authority required?

No. It falls under the principle of "self-assessment, declaration, and retention of documentation for inspection," but the documentation must be genuine and verifiable. If the documentation cannot be provided during subsequent inspections, the tax benefits will need to be refunded, and it may also affect the taxpayer's credit rating.

VI. Basis

• Announcement on Further Improving the Policy for Additional Deduction of R&D Expenses Before Tax (Announcement No. 7 of 2023 by the Ministry of Finance and the State Administration of Taxation) (财政部 税务总局公告2023年第7号)
• Notice on Improving the Policy for Additional Deduction of Research and Development Expenses Before Tax (CaiShui [2015] No. 119) —— Negative list industries, scope of expense aggregation (财税〔2015〕119号)
• State Administration of Taxation Execution Guidelines for the Policy on Additional Deduction of R&D Expenses (Version 2.0) (July 2023)
• State Taxation Administration of Zhejiang Province: This Tax Preference is Not Limited to Technology Enterprises Only (2026-10-13, Source: Xinhua News Agency)
• Announcement on Optimizing Prepayment Declaration for Enjoying Additional Deduction of R&D Expenses (Announcement No. 11 of 2023 by the State Administration of Taxation) (国家税务总局公告2023年第11号)

The matter of R&D expenses does not have a one-size-fits-all answer; it depends on what your factory has actually done and what records you have kept, as well as the industry and revenue structure. If you are unsure, you can call us at 135 6699 1667 first to get clarification, and then handle it yourself if you prefer.

This article only discusses policy guidelines and calculation methods, and does not constitute tax advice. For specific declarations, please follow the guidance of your local tax authority and the latest documents.