A: According to the Enterprise Income Tax Law of People's Republic of China (PRC) and its implementing regulations, the actual and reasonable bad debt losses related to the income obtained by enterprises are allowed to be deducted when calculating the taxable income. Provisions for impairment of assets, risk reserves and other reserves that do not meet the requirements of the competent departments of finance and taxation of the State Council shall not be deducted. Article 2 of the Notice of State Taxation Administration of The People's Republic of China on Several Tax Treatment Issues in the Implementation of Enterprise Income Tax (Guo Shui Han [2009] No.202) stipulates: "According to Article 55 of the Implementation Regulations, except for the reserves approved by the Ministry of Finance of People's Republic of China (PRC) and State Taxation Administration of The People's Republic of China, other industries and enterprises can be deducted before tax.
That is to say, although these impairment reserves listed in the first part have been included in the current profit and loss, they cannot be deducted before the current enterprise income tax. Only when these accrued losses actually occur can they be deducted during the tax period when the losses actually occur.
Since unapproved reserve expenses refer to reserve expenses that are not allowed to be deducted before tax, such as asset impairment reserve and risk reserve, which are not in line with the provisions of the competent departments of finance and taxation in the State Council, what are those approved reserve expenses? Mainly includes the following categories:
(1) Financial enterprises: general loan loss, agricultural loan loss reserve and SME loan loss reserve;
(2) Insurance enterprises: insurance guarantee fund, unexpired liability reserve, life insurance liability reserve, long-term health liability reserve, outstanding claims reserve and catastrophe risk reserve;
(3) SME credit guarantee institutions: guarantee compensation reserve and unexpired liability reserve;
(4) Securities industry: stock exchange risk fund, securities settlement risk fund, securities investor protection fund, futures exchange risk reserve, futures company risk reserve and futures investor protection fund;
(5) China UnionPay Co., Ltd.: special risk reserve.
What is the meaning of intangible assets impairment reserve?
An enterprise shall regularly check the book value of intangible assets, at least once at the end of each year, and estimate the recoverable amount of intangible assets (ibid.), recognize the part of the book value of intangible assets that exceeds the recoverable amount as impairment reserve, and make provision for impairment of intangible assets for the difference between the recoverable amount and the book value.