The Ministry of Finance has put forward a new tax deduction rule to encourage enterprises to increase R&D investment and strengthen innovation capacities, Xinhua news agency reported.

When a company commissions foreign institutions to conduct R&D activities, only 80% of the actual expense incurred during the R&D will be counted as taxable spending.

And if overseas R&D spending does not exceed two-thirds of the approved domestic R&D cost, it can be deducted before corporate income tax.

Companies are required to sign a technology development contract with the commissioned institutions and register with the administrative department of science and technology.

The new rule has been effective from the beginning of this year.