Annual net sales (operating) income of 15 million yuan and below, not more than 5 per cent of net sales (operating) income; annual net sales (operating) income of more than 15 million yuan, not more than the part of the 3 per cent.
Enterprise Income Tax Deduction Measures
Chapter I General Principles
Article 1 In accordance with the spirit of the provisions of the "Provisional Regulations on Enterprise Income Tax of the People's Republic of China and the State" and its implementing rules (hereinafter referred to as the "Regulations", "Rules"), these Measures are hereby formulated. ), these Measures are formulated.
Article 2 Article 4 of the Regulations provides that the balance of the total income of a taxpayer for each taxable year less the permitted deductions shall be the taxable income. Allowable deductions are all necessary and normal costs, expenses, taxes and losses incurred by a taxpayer in each taxable year in connection with the acquisition of taxable income.
Article 3 Deductions declared by taxpayers shall be true and legal. Truthfulness refers to the ability to provide appropriate evidence to prove that the relevant expenditures have actually been incurred; lawfulness refers to compliance with the national tax regulations, and where the provisions of other laws and regulations are inconsistent with the provisions of the tax regulations, the provisions of the tax laws and regulations shall prevail.
Article 4 Except as otherwise provided in the tax laws and regulations, the recognition of pre-tax deduction shall generally follow the following principles:
(1) Accrual principle. That is, taxpayers shall recognize the deduction when the expense is incurred rather than when it is actually paid.
(ii) Matching principle. That is, the expenses incurred by the taxpayer should be declared in the period in which the expenses should be matched or should be allocated for deduction. Taxpayers should be declared in a tax year of deductible expenses shall not be declared in advance or late deduction.
(C) the principle of relevance. That is, the taxpayer's deductible expenses from the nature and source must be related to the acquisition of taxable income.
(D) the principle of certainty. That is, the taxpayer's deductible expenses must be certain in amount regardless of when they are paid.
(v) The principle of reasonableness. That is, the method of calculating and allocating the taxpayer's deductible expenses should be consistent with general business routines and accounting practices.
Article V. Expenses incurred by a taxpayer must be strictly distinguished between operating and capital expenditures. Capital expenditures shall not be directly deducted in the period in which they are incurred, but must be depreciated, amortized or included in the cost of the investment concerned in installments in accordance with the provisions of the tax laws and regulations.
Article 6 In addition to the provisions of Article 7 of the Regulations, the following expenditures shall not be deducted when calculating taxable income:
(1) Illegal expenditures such as bribery;
(2) Fines, penalties, late fees delivered for violation of laws and administrative regulations;
(3) Provision for decline in the value of inventories, reserve for decline in the value of short-term investments, impairment of long-term investments, reserve for risk reserve fund (including investment reserve fund), reserve for risk reserve fund (including investment reserve fund), and reserve for long-term investments. reserve, risk reserve fund (including investment risk reserve fund), and any form of reserve other than those that can be withdrawn as stipulated by national tax regulations;
(d) Tax regulations have specific deduction ranges and standards (ratios or amounts), and the portion of the actual incurred expenses that exceeds or is higher than the statutory ranges and standards.
Article 7 The determination of the cost of each asset such as inventories, fixed assets, intangible assets and investments of a taxpayer shall follow the principle of historical cost. Where a taxpayer undergoes reorganization activities such as merger, demerger and capital structure adjustment, and the implied appreciation or loss of the assets concerned has been recognized and realized for tax purposes, the cost of the assets concerned may be determined on the basis of the value confirmed by appraisal.
Chapter II Costs and Expenses
Article 8 Costs are the costs incurred by taxpayers in the sale of commodities (products, materials, scraps, wastes, waste materials, etc.), the provision of labor services, and the transfer of fixed assets and intangible assets (including technology transfer).
Article 9 Taxpayers must reasonably divide the costs incurred in business activities into direct costs and indirect costs. Direct costs are direct materials, direct labor, etc. that can be directly included in the operating costs of the relevant costing object or labor. Indirect costs are multiple departments to provide services for the same cost object *** the same cost, or the same inputs can be manufactured, provide two or more products or services of the joint cost.
Direct costs may be charged directly to the operating costs of the costing object or labor in question on the basis of relevant accounting documents and records. Indirect costs must be allocated and charged to the relevant costing object in a reasonable way based on the causal relationship with the costing object, the output of the costing object, etc.
Article 10 The various inventories of a taxpayer shall be valued at the actual cost at the time of acquisition. The actual cost of a taxpayer's purchased inventory includes the purchase price, purchase expenses and taxes.
Taxes included in the cost of inventories refer to consumption tax, customs duty, resource tax and input tax on value-added tax incurred in purchasing, self-manufacturing or commission-processing of inventories that cannot be deducted from output tax.
The cost of a taxpayer's self-manufactured inventory includes overhead expenses such as manufacturing costs.
Article 11 The cost valuation method for the issue or adoption of each inventory of a taxpayer may be the individual valuation method, the first-in-first-out method, the weighted-average method, the moving-average method, the planned-cost method, the gross-margin method or the retail-price method. The LIFO method may also be used to determine the cost of inventory issued or received if the physical process of the inventory being used by the taxpayer is consistent with the LIFO method. Taxpayers using the planned cost method or retail price method to determine the cost of inventory or the cost of goods sold must carry forward the cost difference or the difference between the purchase and sale of goods in a timely manner at the time of filing tax returns at the end of the year.
Article 12 The costing method, indirect cost allocation method and inventory valuation method of a taxpayer shall not be changed arbitrarily once they are determined, and if they need to be changed, they shall be reported to the competent tax authorities for approval before the beginning of the next tax year. Otherwise, if the taxable income is affected, the tax authorities have the right to adjust.
Article 13 Expenses refer to the deductible selling, administrative and financial expenses incurred by a taxpayer in each taxable year, except for the relevant expenses that have been included in the cost.
Article 14 Selling expenses are expenses incurred for the sale of goods that should be borne by the taxpayer, including advertising, transportation, loading and unloading, packaging, exhibition, insurance, sales commissions (import commissions that can be directly identified to adjust the cost of goods at the price of entry), sales commissions, operating leases, and travel expenses incurred by the sales department, wages, benefits and other expenses.
Taxpayers engaged in the business of commodity distribution of purchased inventory before arriving at the warehouse of packaging costs, transportation and miscellaneous expenses, transportation and storage process of insurance, loading and unloading costs, reasonable wear and tear during transportation and warehousing before the selection of the finishing costs of the purchase of goods can be directly accounted for in the cost of goods sold. If the taxpayer has already included the above purchase costs in the cost of inventory according to the needs of accounting, the deduction shall not be repeatedly declared in the name of selling expenses.
The selling expenses of taxpayers engaged in real estate development business also include modification and repair costs, caretaking costs and heating costs before the sale of development products.
Taxpayers engaged in other businesses, such as post and telecommunications, incurring sales expenses that have been included in operating costs shall not be counted as sales expenses for double deduction.
Article 15 The administrative expenses are the expenses incurred by the administrative department of the taxpayer to provide various support services for the management of the organization's business activities. Administrative expenses include headquarters (company) expenses, research and development expenses (technology development fees), social security contributions, labor protection fees, business entertainment expenses, labor union expenses, employee education expenses, shareholders' meeting or board of directors' fees, amortization of start-up costs, amortization of intangible assets (including land use fees, land loss compensation fees), mineral resources compensation fees, bad debt losses, stamp duties and other taxes, fire protection fees, sewage charges, greening fees, and other taxes. fees, sewage charges, greening fees, foreign affairs fees and costs for legal, financial, data processing and accounting affairs (consulting fees, litigation fees, fees for hiring intermediaries, trademark registration fees, etc.), as well as reasonable management fees paid to the head office (the head office of a head office of the same legal entity) in connection with its own profit-making activities. Unless approved by the State Administration of Taxation or its authorized tax authorities, a taxpayer shall not charge the management fees paid to its affiliates.
Headquarter expenses, also known as corporate expenses, include wages and salaries of headquarter executives, fringe benefits, travel expenses, office expenses, depreciation, repairs, consumption of materials, and amortization of low-value consumables.
Article 16 Finance costs are the costs incurred by taxpayers to raise operating funds, including net interest expenses, net exchange losses, financial institution fees and other non-capitalized expenditures.
Chapter III Wage and Salary Expenditures
Article 17 Wage and salary expenditures are all labor remuneration in cash or non-cash form paid by a taxpayer in each taxable year to an employee who serves in the enterprise or has an employment relationship with him/her, including basic wages, bonuses, allowances, subsidies, year-end raises, overtime wages, and other expenditures related to the service or employment.
Regional subsidies, price subsidies, and missed meal allowances shall be included as wage and salary expenses.
Article 18 The following expenditures incurred by a taxpayer shall not be regarded as expenditures on wages and salaries:
(1) Dividend income distributed as a result of an employee's investment in the taxpayer;
(2) Social security contributions paid on behalf of an employee in accordance with the provisions of the national or provincial government;
(3) Expenditures on various welfare benefits paid out of the withdrawn Employee Welfare Fund (including (c) Expenditures on welfare benefits (including subsidies for employees' living difficulties and travel expenses for visiting relatives) paid from the withdrawn Employees' Welfare Fund;
(d) Expenditures on labor protection;
(e) Expenditures on travel expenses for transferring employees to other jobs and on settling down costs;
(f) Expenditures on employees' retirement and retired treatment;
(g) Subsidies for one-child children;
(h) Housing reserve fund borne by the internal revenue earners;
(i) The State Administration of Taxation (SAT)'s contribution to social security paid for employees in accordance with the regulations of the national or provincial governments
(ix) Other items that the State Administration of Taxation (SAT) determines are not part of the wage and salary expenses.
Article 19 Employees who work in the enterprise or have an employment relationship with it include fixed workers, contract workers, and temporary workers, except for the following:
(1) personnel of infirmaries, staff bathrooms, barber shops, kindergartens, and nurseries who shall be charged to the employee welfare expenses withdrawn;
(2) retired employees who have received pension insurance benefits and unemployment relief benefits, laid-off workers, and workers to be laid off;
(3) management service personnel of housing sold or rental housing whose rental income is included in the housing revolving fund;
Article 20 Unless otherwise provided, salary and wage expenditures shall be subject to the method of deducting taxable wages, and the standards for deducting taxable wages shall be implemented in accordance with the regulations of the Ministry of Finance and the State Administration of Taxation.
Article 21 Wage and salary expenditures paid to employees by taxpayers approved to implement the work-performance linkage method, and commission wages withdrawn and issued by the catering service industry in accordance with the state regulations may be deducted according to the facts.
Chapter IV Depreciation or Amortization of Assets
Article 22 Depreciation expenses of fixed assets and amortization expenses of intangible and deferred assets used in the business activities of taxpayers are deductible.
Article 23 The valuation of fixed assets of a taxpayer shall be in accordance with the provisions of Article 30 of the Rules. After the value of fixed assets has been determined, it generally shall not be adjusted except for the following special circumstances:
(i) the liquidation of assets under the unified regulations of the State;
(ii) dismantling of a part of a fixed asset;
(iii) the occurrence of permanent damage to a fixed asset, which may be adjusted to the recoverable amount of such fixed asset upon examination and approval of the competent tax authorities and recognition of a loss;
(iv) Adjustment of the original provisional value based on the actual value or discovery of errors in the original valuation.
Article 24 The scope of depreciation of fixed assets for taxpayers shall be as provided in Article 31 of the Rules. Unless otherwise provided, the following assets shall not be subject to depreciation or amortization expense:
(1) housing that has been sold to individual employees and housing that has been rented to individual employees and the rental income is not included in the gross income but is included in the housing revolving fund;
(2) goodwill created by oneself or purchased from outside;
(3) fixed and intangible assets received as donation.
Article 25 Unless otherwise provided, the minimum years for depreciation of fixed assets shall be as follows:
(1) 20 years for houses and buildings;
(2) 10 years for trains, ships, machines, machineries, and other production equipments;
(3) 5 years for electronic equipments, and means of transportation other than trains and ships, as well as appliances and utensils related to production and operation, tools, furniture, etc. for five years.
Article 26 For the promotion of scientific and technological progress, environmental protection and the state to encourage the investment of key equipment, as well as perennial vibration, ultra-intensive use or acid, alkali and other strong corrosion of machinery and equipment, there is a need to shorten the depreciation life or accelerated depreciation methods, by the taxpayer to submit an application, by the local tax authorities in charge of the examination and verification, and then reported to the State Administration of Taxation for approval at each level.
Article 27 The calculation of depreciation of fixed assets deductible by taxpayers shall be based on the straight-line depreciation method.
Article 28 The value of intangible assets purchased by a taxpayer includes the purchase price and related expenses incurred in the purchase process.
Taxpayers who develop intangible assets on their own should accurately collect the research and development expenses, and where such expenses have been directly deducted as research and development expenses at the time of incurring, the intangible assets shall not be amortized in installments when they are used.
Article 29 The land concession price paid by a taxpayer to the state or other taxpayers for the acquisition of land use rights shall be managed as an intangible asset and amortized equally over a period of time not shorter than the period of use specified in the contract.
Article 30 The software attached to computer hardware purchased by a taxpayer, which is not separately valued, shall be merged into the computer hardware and managed as a fixed asset; the software, which is separately valued, shall be managed as an intangible asset.
Article 31 The fixed asset repair expenditures of a taxpayer may be directly deducted in the period in which they are incurred. Expenditures on improvement of fixed assets of a taxpayer may increase the value of fixed assets if the fixed assets concerned have not been fully depreciated; if the fixed assets concerned have been fully depreciated, they may be treated as deferred expenses and amortized equally over a period of not shorter than five years.
Repair of fixed assets that meets one of the following conditions shall be regarded as fixed asset improvement expenditures:
(i) the repair expenditures incurred amount to more than 20% of the original value of the fixed assets;
(ii) the economic useful life of the assets concerned is extended by more than two years after the repair;
(iii) the repaired fixed assets are utilized for a new or different purpose. (iv) the fixed asset is used for a new or different purpose.
Article 32 The cost of a taxpayer's outward investment shall not be depreciated or amortized, nor shall it be directly deducted as an expense of the current period of the investment, but it may be subtracted from the income derived from the transfer of property upon the transfer or disposal of the investment asset in question, on the basis of which the income or loss from the transfer of property is calculated.
Chapter V Borrowing Costs and Rental Expenditures
Article 33 Borrowing costs are the interest costs borne by taxpayers for the needs of their business activities and related to the borrowed funds, including:
(1) interest on long-term and short-term borrowings;
(2) amortization of discounts or premiums related to bonds;
(3) amortization of auxiliary costs incurred in arranging borrowings;
(4) amortization of auxiliary costs incurred in arranging borrowings;
(5) amortization of auxiliary costs incurred in arranging borrowings; and amortization of ancillary costs incurred in arranging the borrowings;
(iv) differences arising from foreign currency borrowings related to funds borrowed as an adjustment to interest expense.
Article 34 Taxpayers may directly deduct operating borrowing costs incurred in compliance with the conditions of the regulations on the qualification of interest levels. Borrowings incurred for the acquisition, construction and production of fixed assets and intangible assets, the borrowing costs incurred during the period of acquisition and construction of the assets concerned shall be included in the cost of the assets concerned as capital expenditures; borrowing costs incurred after the delivery and use of the assets concerned may be deducted in the period in which they are incurred.
If a taxpayer's borrowings are not specified, its borrowing costs shall be reasonably calculated according to the proportion of funds occupied by operating activities and capital expenditures, and the borrowing costs to be included in the cost of the relevant assets and the borrowing costs that can be directly deducted.
Article 35 Borrowing costs incurred by a taxpayer engaged in the business of real estate development for the purpose of borrowing funds for the development of real estate shall be included in the development cost of the real estate concerned if they are incurred before the completion of the real estate.
Article 36 If the amount of borrowings obtained by a taxpayer from a related party exceeds 50% of its registered capital, the interest expenses on the exceeding part shall not be deducted before tax.
Article 37 Borrowing expenses incurred by a taxpayer for funds borrowed for foreign investment shall be included in the cost of the investment in question, and shall not be deducted as operating expenses of the taxpayer before tax.
Article 38 Where a taxpayer acquires fixed assets from a lessor by way of operating lease, its rentals in conformity with the principle of transaction of independent taxpayers may be evenly deducted according to the time of benefit.
Article 39 A taxpayer who acquires fixed assets from a lessor by means of a finance lease is not allowed to deduct its rental expenses, but may draw depreciation expenses according to the regulations. A finance lease is a lease that transfers in substance all the risks and rewards associated with the ownership of an asset.
A lease that meets one of the following conditions is a finance lease:
(i) ownership of the leased asset is transferred to the lessee at the end of the lease term;
(ii) the lease term is for a majority of the asset's useful life (75% or more);
(iii) the minimum payments under the lease during the lease term are greater than or substantially equal to the fair value of the asset as at the commencement date of the lease.
Chapter VI Advertising and Business Entertainment Expenses
Article 40 Taxpayers may deduct the advertising expenses incurred in each taxable year up to a maximum of 2% of the sales (business) income; the excess may be carried forward indefinitely to the subsequent taxable years. Advertising expenses for grain-based liquor shall not be deducted before tax. If a taxpayer really needs to increase the deduction ratio of advertising expenses due to special reasons such as industry characteristics, the taxpayer shall report to the State Administration of Taxation for approval.
Article 41 The taxpayers shall strictly distinguish the advertising expenses from the sponsorship expenses. The advertising expenses declared by taxpayers for deduction must meet the following conditions:
(1) the advertisements are produced through specialized agencies approved by the industrial and commercial departments;
(2) the expenses have been actually paid and corresponding invoices have been obtained;
(3) the advertisements are disseminated through certain media.
Article 42 The business propaganda expenses incurred by a taxpayer in each taxable year (including advertising expenses not through the media) may be deducted according to the actual situation within the range of not exceeding 5 per cent of the sales operating income.
Article 43 The business entertainment expenses incurred by a taxpayer that are directly related to its business operations may be deducted within the following prescribed ratios:
If the annual net sales (operating) income is 15 million yuan or less, it shall not be more than 5 per cent of the net sales (operating) income; if the annual net sales (operating) income exceeds 15 million yuan, it shall not be more than 3 per cent. 3‰.
Article 44 If a taxpayer declares the deduction of business entertainment expenses, and the competent tax authorities require the provision of supporting information, the taxpayer shall provide sufficient and valid vouchers or information to prove the authenticity of the expenses. If they cannot be provided, they shall not be deducted before tax.
Chapter VII Bad Debt Losses
Article 45 Bad debt losses incurred by taxpayers shall, in principle, be deducted according to the actual amount incurred. Upon reporting to the tax authorities for approval, bad debt reserves may also be withdrawn. Bad debt losses incurred by taxpayers who have withdrawn bad debt reserves shall be deducted from the bad debt reserves; the portion of bad debt losses actually incurred in excess of the bad debt reserves withdrawn may be directly deducted in the period in which it occurs; and the recovery of bad debts that have already been written off shall correspondingly increase the taxable income of the current period.
Article 46 The approval of the taxpayers can withdraw bad debt reserve, unless otherwise specified, the bad debt reserve withdrawal ratio shall not exceed 5 per cent of the balance of accounts receivable at the end of the year. The accounts receivable at the end of the year for which provision for bad debts has been made are the sums of money, including the transportation and miscellaneous fees advanced on behalf of the customers who purchased the goods or accepted the services, which are receivable from the customers of the taxpayers due to the sale of commodities, products or the provision of labor services, and so on. Accounts receivable at year-end include the amount of notes receivable.
Article 47 Accounts receivable of a taxpayer that meets one of the following conditions shall be treated as bad debts:
(1) Accounts receivable whose debtor has been declared bankrupt or withdrawn according to law, and whose remaining property is really insufficient to settle the accounts receivable;
(2) Accounts receivable whose debtor has died or has been declared dead or disappeared according to law, and whose property or estate is really insufficient to settle the accounts receivable;
(iii) The debtor suffers from a major natural disaster or accident, the loss is huge, and the accounts receivable that really cannot be settled with its property (including insurance compensation, etc.);
(iv) The debtor overstays its obligation to repay the debt, and the accounts receivable that is really unable to be settled by the court's ruling;
(v) The accounts receivable that has been overstayed for more than 3 years is not collected;
(vi) The accounts receivable that has been approved by the State Administration of Taxation for write-off;
(vii) The accounts receivable that has been approved by the State Administration of Taxation for write-off; and (vi) Accounts receivable approved by the State Administration of Taxation for write-off;
Article 48 No provision for bad debts shall be made for claims receivable incurred by taxpayers in non-purchase and sale activities and for any current accounts between related parties. Nor shall any current accounts between related parties be recognized as bad debts.
Chapter VIII Other Deductions
Article 49 The basic old-age insurance premiums, basic medical insurance premiums, basic unemployment insurance premiums paid by taxpayers to the tax authorities, labor and social security departments or their designated agencies for all employees in accordance with state regulations, the employment guarantee premiums for the disabled paid in accordance with the standards confirmed by the provincial tax authorities, and the statutory personal safety insurance paid for special types of employees in accordance with state regulations may be deducted. personal safety insurance, can be deducted.
Article 50 Life insurance or property insurance taken out by taxpayers for their investors or individual employees with commercial insurance organizations, as well as supplementary insurance taken out for their employees in addition to the basic insurance, shall not be deductible.
Article 51 Taxpayers are allowed to deduct consumption tax, business tax, resource tax, customs duty and product sales tax and surcharge such as urban maintenance and construction fee and education surcharge, as well as property tax, vehicle and vessel use tax, land use tax and stamp duty incurred.
Article 52 Reasonable travel expenses, meeting expenses and board of directors' fees incurred by taxpayers in connection with their business activities shall be able to provide legal vouchers proving their authenticity if the competent tax authorities request for the provision of supporting information; otherwise, they shall not be deducted before tax.
The supporting materials for travel expenses shall include: name of the traveler, place, time, task, payment vouchers and so on.
The supporting documents for meeting expenses shall include: time, place, attendees, content, purpose, cost standard, payment vouchers and so on.
Article 53 The commission incurred by a taxpayer may be included in the sales expenses if it meets the following conditions:
(1) there are legal and authentic certificates;
(2) the object of payment must be an independent taxpayer or an individual who is entitled to engage in the intermediary services (the object of payment does not include the employees of the enterprise);
(3) the commission paid to an individual, unless otherwise stipulated , shall not exceed five percent of the amount of the service.
Article 54 Reasonable labor protection expenditures actually incurred by a taxpayer are deductible. Labor protection expenditures refer to the expenditures incurred to equip or provide employees with working clothes, gloves, safety protection articles, heat-prevention articles, etc., which are really necessary for work.
Article 55 The net loss of assets incurred by a taxpayer in case of inventory loss or scrapping, less the balance of compensation of the liable person and insurance compensation, can be deducted after examination by the competent tax authorities. Property losses incurred by taxpayers in the sale of employees' housing shall not be deducted.
Article 56 Liquidated damages (including bank penalties and interest), fines and litigation costs paid by taxpayers in accordance with the provisions of economic contracts are deductible.
Chapter IX Supplementary Provisions
Article 57 In accordance with these Measures and the relevant tax regulations, for matters that need to be examined and approved by the tax authorities for pre-tax deduction, the provincial-level tax authorities may make provisions requiring the taxpayers to attach an examination certificate of a registered tax accountant or a certified public accountant of China when submitting the report for examination and approval by the tax authorities.
Article 58 These Measures shall be implemented from January 1, 2000 onwards.
Article 59 If the previous relevant provisions are inconsistent with these Measures, they shall be implemented in accordance with these Measures. Matters not provided for in these Measures shall be implemented in accordance with the relevant provisions.