Regulations for the Implementation of the Enterprise Income Tax Law of the People's Republic of China*** and the State of China Section III Deduction
Article 27 Relevant expenditures as referred to in Article 8 of the Enterprise Income Tax Law refer to expenditures directly related to the acquisition of income.
Reasonable expenditures referred to in Article 8 of the Law on Enterprise Income Tax refer to the necessary and normal expenditures that are in line with the routine of production and business activities and should be included in the profit and loss of the current period or in the cost of the relevant assets.
Article 28 Expenditures incurred by an enterprise shall be distinguished between revenue expenditure and capital expenditure. Revenue expenses shall be directly deducted in the period in which they are incurred; capital expenses shall be deducted in installments or included in the cost of the assets concerned, and shall not be directly deducted in the period in which they are incurred.
Enterprises' non-taxable income used for expenses formed by the cost or property, shall not be deducted or calculated corresponding depreciation, amortization deduction.
Except as otherwise provided in the Enterprise Income Tax Law and these Regulations, no double deduction shall be made for costs, expenses, taxes, losses and other expenditures actually incurred by an enterprise.
Article 29 Costs referred to in Article 8 of the Enterprise Income Tax Law refer to the cost of sales, cost of goods sold, business expenses and other consumptions incurred by an enterprise in its production and business activities.
Article 30 Expenses referred to in Article 8 of the Law on Enterprise Income Tax refer to the selling, administrative and financial expenses incurred by an enterprise in its production and operation activities, except for the relevant expenses that have already been included in the costs.
Article 31 Taxes referred to in Article 8 of the Law on Enterprise Income Tax refer to the taxes and surcharges other than enterprise income tax and value-added tax allowed to be deducted incurred by an enterprise.
Article 32 Losses referred to in Article 8 of the Enterprise Income Tax Law refer to the losses incurred by an enterprise in its production and business activities in respect of the loss, destruction and scrapping of fixed assets and inventories, the loss of transferring property, the loss of doubtful debts, the loss of bad debts, the loss caused by natural disasters and other force majeure factors, and other losses.
Losses incurred by an enterprise, less the compensation of the responsible person and the balance of insurance claims, shall be deducted in accordance with the provisions of the competent financial and tax authorities of the State Council.
Assets that have been treated as losses by an enterprise and are fully or partially recovered in a subsequent tax year shall be recognized as current income.
Article 33 Other expenditures referred to in Article 8 of the Enterprise Income Tax Law refer to the reasonable expenditures incurred by an enterprise in the course of its production and operation activities that are related to its production and operation activities, in addition to costs, expenses, taxes and losses.
Article 34 Reasonable expenditures on wages and salaries incurred by enterprises are allowed to be deducted.
Wages and salaries referred to in the preceding paragraph refer to all labor remuneration in cash or non-cash form paid by an enterprise to its employees serving or employed in the enterprise in each taxable year, including basic wages, bonuses, allowances, subsidies, year-end raises, overtime wages, and other expenditures related to the employees' service or employment.
Article 35 Deductions shall be allowed for basic social insurance premiums such as basic pension insurance premiums, basic medical insurance premiums, unemployment insurance premiums, industrial injury insurance premiums, maternity insurance premiums, and other basic social insurance premiums and housing provident funds paid by an enterprise for its employees in accordance with the scope and standard stipulated by the relevant competent department of the State Council or the people's government of a provincial level.
Supplementary pension insurance premiums and supplementary medical insurance premiums paid by enterprises for investors or employees shall be allowed to be deducted within the scope and standards stipulated by the competent departments of finance and taxation under the State Council.
Article 36 No deduction shall be allowed for commercial insurance premiums paid by an enterprise for investors or employees, except for personal safety insurance premiums paid by the enterprise for special types of workers in accordance with relevant state regulations and other commercial insurance premiums that are deductible as stipulated by the competent departments of finance and taxation under the State Council.
Article 37 Reasonable borrowing costs incurred by an enterprise in its production and business activities that do not need to be capitalized shall be allowed to be deducted.
Where an enterprise incurs borrowings for the acquisition and construction of fixed assets, intangible assets and inventories that can only reach the intended marketable state after more than 12 months of construction, reasonable borrowing costs incurred during the period of acquisition and construction of the assets in question shall be included in the cost of the assets in question as a capital expenditure and deducted in accordance with the provisions of these Regulations.
Article 38 The following interest expenses incurred by an enterprise in the course of its production and business activities shall be allowed to be deducted:
(1) interest expenses on borrowings by a non-financial enterprise from a financial enterprise, interest expenses on deposits by a financial enterprise and interest expenses on interbank lending, and interest expenses on bonds issued by an enterprise with the authorization of the issuance of the bonds;
(2) interest expenses on loans by a non-financial enterprise from a non-financial enterprise, not exceeding the amount of interest expenses in accordance with the provisions of the Financial Regulations. interest expenses, not exceeding the portion of the amount calculated in accordance with the interest rate of similar loans of financial enterprises for the same period.
Article 39 The exchange loss incurred by an enterprise in a currency transaction and at the end of the tax year when monetary assets and liabilities other than Renminbi are converted into Renminbi at the mid-rate of the spot Renminbi exchange rate at the end of the period shall be allowed to be deducted except for the portion which has already been included in the cost of the relevant assets as well as those which are relevant to the distribution of profits to the owners.
Article 40: Expenditures incurred by an enterprise for employee welfare costs shall be deductible to the extent that they do not exceed 14% of the total wages and salaries.
Article 41 The part of labor union funds allocated by an enterprise not exceeding 2% of the total wages and salaries shall be allowed to be deducted.
Article 42 Except as otherwise provided by the competent departments of finance and taxation of the State Council, enterprises shall be allowed to deduct the part of employee education expenses not exceeding 2.5% of the total wages and salaries; and the part exceeding the total wages and salaries shall be allowed to be carried forward for deduction in the following tax years.
Article 43 of the business hospitality expenses incurred by enterprises related to production and business activities, in accordance with the amount of 60% deduction, but the maximum shall not be more than 5 ‰ of the current year's sales (operating) income.
Article 44 The qualified advertising and business promotion expenses incurred by an enterprise, in addition to the provisions of the State Council, the competent departments in charge of finance and taxation, not exceeding 15% of the current year's sales (operating) income shall be allowed to be deducted; more than that portion shall be allowed to be deducted in the subsequent tax years.
Article 45 The special funds extracted by an enterprise in accordance with the relevant provisions of laws and administrative regulations for the purpose of environmental protection and ecological restoration shall be allowed to be deducted. No deduction shall be allowed for any change in the use of the said special funds after they are withdrawn.
Article 46 Enterprises participating in property insurance are allowed to deduct the insurance premiums paid in accordance with the regulations.
Article 47 The leasing fees paid by an enterprise for leasing fixed assets according to the needs of production and business activities shall be deducted in accordance with the following methods:
(1) the leasing fee expenses incurred for leasing fixed assets by way of operating leases shall be deducted evenly in accordance with the term of the leases;
(2) the leasing fee expenses incurred for leasing fixed assets by way of finance leases shall constitute the value of the fixed assets leased by way of finance in accordance with the regulations. The portion of the value of the leased fixed assets shall be depreciated and deducted in installments.
Article 48 Reasonable labor protection expenditures incurred by an enterprise shall be allowed to be deducted.
Article 49 Management fees paid between enterprises, rents and royalties paid between business organizations within an enterprise, and interest paid between business organizations within a non-banking enterprise shall not be deducted.
Article 50 A non-resident enterprise shall be allowed to deduct the expenses incurred by its head office outside China in connection with the production and operation of the institution or place of business of the institution or place of business for the institution or place of business of the non-resident enterprise set up within the territory of China, if it can provide the supporting documents of the scope of the pooling of the expenses, the fixed amount, the basis and method of allocation, etc., issued by the head office, and if it can be reasonably apportioned, then the deduction shall be allowed.
Article 51 The public welfare donation referred to in Article 9 of the Enterprise Income Tax Law refers to the donations made by enterprises through public welfare organizations or people's governments and their departments at or above the county level for the public welfare undertakings stipulated in the Law of the People's Republic of China on Donations for Public Welfare Undertakings.
Article 52 The public welfare social organizations referred to in Article 51 of these Regulations, refers to the foundations, charitable organizations and other social organizations that also meet the following conditions:
(1) registered in accordance with the law, with the qualification of a legal person;
(2) with the development of public welfare undertakings for the purpose of the purpose, and not for the purpose of making profits;
(3) all the assets and their value-added for that legal person (d) The proceeds and operating balances are mainly used for undertakings consistent with the purpose for which the legal person was established;
(e) The remaining property after termination does not belong to any individual or profit-making organization;
(f) It does not operate businesses unrelated to the purpose for which it was established;
(g) There is a sound financial accounting system;
(h) Donors do not participate in any form of distribution of the property of the social organization;
(i) It does not have the right to participate in any form of distribution of the property of the social organization. any form of participation in the distribution of the property of the social organization;
(ix) other conditions stipulated by the competent departments of finance and taxation under the State Council in conjunction with the civil affairs department under the State Council and other registration and management departments.
Article 53 Enterprises shall be allowed to deduct public welfare donation expenditures incurred by them, not exceeding 12% of their total annual profits.
Total annual profit means the annual accounting profit calculated by the enterprise in accordance with the provisions of the national unified accounting system.
Article 54 The sponsorship expenditure referred to in Article 10(6) of the Enterprise Income Tax Law refers to all kinds of non-advertising expenditures incurred by an enterprise which are not related to its production and operation activities.
Article 55 The unauthorized reserve expenditures referred to in Item (7) of Article 10 of the Enterprise Income Tax Law refer to the expenditures for various asset impairment provisions, risk provisions and other reserves that do not comply with the regulations of the competent financial and tax authorities of the State Council.
Section IV Tax Treatment of Assets
Article 56 The assets of an enterprise, including fixed assets, biological assets, intangible assets, long-term amortized expenses, investment assets, inventories, etc., shall be taxed on the basis of historical cost.
The historical cost referred to in the preceding paragraph refers to the expenditure actually incurred by the enterprise when it acquired the asset.
An enterprise shall not adjust the taxable base of an asset during the period in which it is held for appreciation or impairment of the asset, except for the provisions of the competent departments of the State Council in charge of finance and taxation, which allow for the recognition of gain or loss.
Article 57 Fixed assets referred to in Article 11 of the Enterprise Income Tax Law means non-monetary assets held by an enterprise for the purpose of production of products, provision of labor services, leasing or business management, and used for a period of more than 12 months, including houses, buildings, machinery, machines, means of transportation, and other equipments, appliances, and tools related to production and business activities.
Article 58 Fixed assets shall have their tax basis determined in accordance with the following methods:
(1) For purchased fixed assets, the purchase price and related taxes paid, as well as other expenditures directly attributable to bringing the asset to its intended use shall be used as the tax basis;
(2) For self-constructed fixed assets, expenditures incurred prior to the completion of the construction and settlement of the work shall be used as the tax basis;
(f) For fixed assets that are altered, except for the expenditures stipulated in Article 13(1) and (2) of the Enterprise Income Tax Law, the taxable value shall be increased by the alteration expenditures incurred in the course of alteration. The taxable base shall be increased by the alteration expenditures incurred in the process of alteration.
Article 59 Depreciation of fixed assets calculated according to the straight-line method is allowed to be deducted.
Enterprises shall calculate depreciation of fixed assets from the month following the month in which the fixed assets are put into use; for fixed assets that are no longer in use, the calculation of depreciation shall be stopped from the month following the month in which the fixed assets are no longer in use.
Enterprises should be based on the nature and use of fixed assets, a reasonable determination of the estimated net residual value of fixed assets. Once determined, the estimated net residual value of fixed assets shall not be changed.
Article 60 Unless otherwise provided by the competent departments of finance and taxation under the State Council, the minimum number of years for calculating depreciation of fixed assets shall be as follows:
(1) for houses and buildings, 20 years;
(2) for airplanes, trains, ships, machines, machineries, and other production equipments, 10 years;
(3) for instruments, tools, furniture, etc., which are related to production and operation activities, 5 years; and , furniture, etc., for 5 years;
(iv) means of transportation other than airplanes, trains and ships, for 4 years;
(v) electronic equipment, for 3 years.
Article 61 Enterprises engaged in the exploitation of mineral resources such as petroleum and natural gas, the expenses incurred before the commencement of commercial production and the methods of depletion and depreciation of the fixed assets concerned shall be separately prescribed by the competent financial and taxation authorities of the State Council.
Article 62 The taxable base of a productive biological asset shall be determined in accordance with the following methods:
(1) For a productive biological asset purchased out of China, the purchase price and the relevant taxes paid shall be the taxable base;
(2) For a productive biological asset acquired by way of donation, investment, exchange of non-monetary assets, debt restructuring, etc., the fair value of the asset and the relevant taxes paid shall be the taxable base. related taxes and fees as the tax basis.
Producing biological assets referred to in the preceding paragraph refer to biological assets held by an enterprise for the production of agricultural products, provision of labor services, or leasing, etc., including economic forests, fuelwood forests, production animals and draft animals.
Article 63 Depreciation of productive biological assets calculated according to the straight-line method shall be allowed to be deducted.
Enterprises shall calculate depreciation from the month following the month in which the productive biological assets are put into use; for productive biological assets that are no longer in use, depreciation shall cease to be calculated from the month following the month in which they are no longer in use.
Enterprises shall reasonably determine the estimated net residual value of productive biological assets based on the nature and use of productive biological assets. The estimated net residual value of the productive biological assets shall not be changed once it is determined.
Article 64 The minimum years for calculating depreciation of productive biological assets shall be as follows:
(1) For productive biological assets of forest and tree type, 10 years;
(2) For productive biological assets of livestock type, 3 years.
Article 65 Intangible assets referred to in Article 12 of the Enterprise Income Tax Law are non-monetary long-term assets without physical form held by an enterprise for the purpose of production of products, provision of labor services, leasing or business management, including patents, trademarks, copyrights, land-use rights, non-patented technologies, goodwill and so on.
Article 66 Intangible assets shall have their tax basis determined in accordance with the following methods:
(1) for purchased intangible assets, the purchase price and related taxes paid, as well as other expenditures directly attributable to the achievement of the intended use of the asset shall be used as the tax basis;
(2) for self-developed intangible assets, the expenditures incurred in the course of the development of the asset after the asset meets the conditions of capitalization and before the achievement of the intended use shall be used as the tax basis;
(2) for self-developed intangible assets, the expenditures incurred in the course of development and before the achievement of the (b) Intangible assets developed by themselves shall be taxed on the basis of expenditures incurred during the development process after the asset meets the conditions for capitalization until it reaches its intended use;
(c) Intangible assets acquired by way of donation, investment, non-monetary exchange of assets, debt restructuring, etc. shall be taxed on the basis of the fair value of the asset and the relevant taxes paid.
Article 67 Amortization expenses of intangible assets calculated according to the straight-line method are allowed to be deducted.
The amortization period of intangible assets shall not be less than 10 years.
If an intangible asset as an investment or a transferee is provided for in the relevant laws or if a useful life is agreed upon in the contract, it may be amortized over a period of time in accordance with the stipulated or agreed upon useful life.
Expenditures on purchased goodwill are allowed to be deducted when the enterprise as a whole is transferred or liquidated.
Article 68 Expenditures for the alteration of fixed assets referred to in Article 13(1) and (2) of the Enterprise Income Tax Law refer to the expenditures incurred for changing the structure of a house or a building and extending its useful life.
Expenditures specified in Article 13(1) of the Enterprise Income Tax Law shall be amortized in accordance with the estimated remaining useful life of the fixed assets, while expenditures specified in item (2) shall be amortized in accordance with the remaining lease term agreed in the contract.
If the fixed assets under alteration extend their useful life, the depreciation life shall be appropriately extended, except for the provisions of Article 13 (1) and (2) of the Enterprise Income Tax Law.
Article 69 The expenditure on major repair of fixed assets referred to in Item (3) of Article 13 of the Enterprise Income Tax Law refers to the expenditure that simultaneously meets the following conditions:
(1) the expenditure on repair reaches more than 50% of the taxable base at the time of acquisition of the fixed assets;
(2) the useful life of the fixed assets is extended by more than two years after the repair.
Expenditures specified in Article 13(3) of the Enterprise Income Tax Law shall be amortized over the remaining useful life of the fixed assets.
Article 70 Other expenditures referred to in Item (4) of Article 13 of the Enterprise Income Tax Law that shall be treated as long-term amortized expenses shall be amortized by installments starting from the month following the month in which the expenditures are incurred, and the amortization period shall not be less than 3 years.
Seventy-one The investment assets referred to in Article 14 of the Enterprise Income Tax Law refer to the assets formed by the enterprise's foreign equity investment and debt investment.
When an enterprise transfers or disposes of an investment asset, the cost of the investment asset is allowed to be deducted.
The cost of an investment asset is determined in accordance with the following methods:
(i) for an investment asset acquired by payment of cash, the purchase price shall be the cost;
(ii) for an investment asset acquired by means other than payment of cash, the fair value of the asset and the relevant taxes paid shall be the cost.
Article 72 Inventories, as referred to in Article 15 of the Enterprise Income Tax Law, refer to products or commodities held by an enterprise for sale, products in the production process, and materials and supplies consumed in the course of production or provision of labor services.
Inventories are costed in accordance with the following methods:
(1) Inventories acquired by cash payment are costed at the purchase price and related taxes paid;
(2) Inventories acquired by means other than cash payment are costed at the fair value of the inventory and related taxes paid;
(3) Inventories harvested from productive biological assets are costed at the output or harvested process. agricultural products, the cost is based on the necessary expenditures incurred in the process of output or harvesting, such as material costs, labor costs and apportioned overhead costs.
Article 73 The costing method of inventories used or sold by an enterprise may choose one of the first-in-first-out method, the weighted-average method or the individual valuation method. Once the valuation method is chosen, it shall not be changed at will.
Article 74 The net value of assets referred to in Article 16 and the net value of property referred to in Article 19 of the Enterprise Income Tax Law refers to the balance of the taxable base of the relevant assets and property less depreciation, depletion, amortization, and reserves that have been deducted in accordance with the provisions.
Article 75 Except as otherwise provided by the competent departments of finance and taxation under the State Council, an enterprise in the process of reorganization shall recognize the gain or loss on the transfer of the relevant assets when the transaction occurs, and the relevant assets shall be re-determined to have a new taxable basis in accordance with the transaction price.