The Ministry of Finance and the State Administration of Taxation Announcement No. 9 of 2020 stipulates that enterprises donating cash and goods for epidemic prevention through public welfare social organizations or the people's governments and their departments at or above the county level and other state organs, as well as donating epidemic prevention and control goods to hospitals undertaking epidemic prevention and control tasks are allowed to make full deductions when calculating taxable income.
Enterprise epidemic prevention donations are not subject to the 12% deduction ratio restriction for public welfare donations stipulated in Cai Shui [2018] No. 15, and can be fully deducted before tax. However, it should be noted that the direct donation to the hospital to undertake the task of epidemic prevention and control can only be epidemic prevention materials can be issued by the hospital donation acceptance letter pre-tax deduction, such as direct donation of cash, according to the provisions of the pre-tax deduction is not allowed.
What items can be deducted when calculating the enterprise income tax?
1. Wage and salary expenses
Reasonable wage and salary expenses incurred by enterprises are allowed to be deducted. Wages and salaries include cash and non-cash basic salaries, bonuses, allowances, subsidies, year-end raises, overtime pay, and other expenses related to the employee's position or employment.
2. Three expenses
Employee welfare expenses: not more than 14% of the total wages and salaries are allowed to be deducted;
Labor union expenses: not more than 2% of the total wages and salaries are allowed to be deducted;
Employee education expenses: not more than 8% of the total wages and salaries are allowed to be deducted, and the part exceeding that amount can be carried forward and deducted in the following tax years. Carry forward the deduction.
3. Insurance premiums
(1) The basic social insurance premiums such as basic pension insurance premiums, basic medical insurance premiums, unemployment insurance premiums, industrial injury insurance premiums, etc. and the housing provident fund (i.e., the four insurance premiums and one gold) paid by the enterprise for the employees in accordance with the scope and standard stipulated by the relevant department of the State Council or the provincial people's government are allowed to be deducted.
(2) the enterprise for all employees to pay the supplemental pension insurance premiums, supplemental medical insurance premiums, respectively, within the standard of no more than 5% of the total wages of the employees, limit the deduction.
(3) In addition to the enterprise in accordance with the relevant provisions of the State for special types of workers to pay for personal safety insurance premiums and the State Council department in charge of finance and taxation can be deducted for other commercial insurance premiums, the enterprise for investors or employees to pay for commercial insurance premiums, shall not be deducted.
(4) enterprise employees on business trips by transportation of personal accident insurance expenses, allowed to deduct.
(5) Enterprises participating in property insurance, in accordance with the relevant provisions of the insurance premiums paid, are allowed to deduct.
(6) Enterprises participating in employer's liability insurance, public liability insurance and other liability insurance, in accordance with the provisions of the insurance premiums paid, are allowed to be deducted before the enterprise income tax.
4. Public welfare donations
Enterprises through public welfare social organizations or people's governments and their departments at or above the county level (including the county level) for charitable activities in accordance with the provisions of the law, public welfare undertakings, the portion of the annual profit within 12% of total profits, allowed to be deducted in the calculation of taxable income; more than that portion, allowed to be carried forward to the next three years in the calculation of taxable income. Deduction.
From January 1, 2019 to December 31, 2022, the donation expenditures for poverty alleviation made by enterprises through public welfare organizations or people's governments and their constituent departments at or above the county level (including the county level), which are used in the targeted poverty alleviation areas, are allowed to be deducted in calculating the taxable income of enterprise income tax. The above policy can continue to be applied if poverty alleviation is realized in the targeted poverty alleviation areas within the policy implementation period. If an enterprise incurs poverty alleviation donation expenditure and other public welfare donation expenditure at the same time, when calculating the deduction limit of public welfare donation expenditure, the eligible poverty alleviation donation expenditure will not be included in the calculation.
5. Business hospitality
Enterprises incurred in production and business activities related to business hospitality expenses, in accordance with the amount of 60% deduction, but the maximum shall not exceed the current year's sales (operating) income of 5 ‰.
Equity investment in the business of enterprises (including the headquarters of the group, venture capital enterprises, etc.), its dividends from the invested enterprises, dividends and equity transfer income, can be calculated in accordance with the prescribed proportion of business hospitality deduction limit.
During the preparatory period, business hospitality expenses incurred in connection with preparatory activities can be included in the preparatory expenses at 60% of the actual amount incurred, without regard to income.
6. Advertising and business promotion expenses
Enterprises incurred eligible advertising and business promotion expenses, except the State Council, the competent financial and tax authorities provide otherwise, not more than 15% of the current year's sales (operating) income is allowed to be deducted; more than that portion of the deduction is allowed to be carried forward to the next tax year.
Enterprises in the preparatory period of advertising and business promotion costs, according to the actual amount incurred in the preparatory costs, and in accordance with the provisions of the deduction.
Cosmetics manufacturing and sales, pharmaceutical manufacturing and beverage manufacturing (excluding alcohol manufacturing) enterprises incurred advertising and business promotion expenses, not more than 30% of the current year's sales (operating) income, are allowed to deduct; more than the portion of the deduction is allowed to be carried forward in subsequent tax years.
Tobacco advertising and business promotion expenses of tobacco companies are not deductible in the calculation of taxable income.
7. Borrowing Costs
(1) Reasonable borrowing costs incurred by an enterprise in the course of its production and business activities that do not need to be capitalized are allowed to be deducted.
(2) Reasonable borrowing costs incurred by an enterprise during the period of acquisition and construction of the relevant assets should be included in the cost of the relevant assets as capital expenditures, which should not be deducted directly in the period in which they are incurred but should be deducted through depreciation, amortization, or at the time of transfer of the assets.
8. Interest expenses
(1) the following interest expenses incurred in production and business activities, are allowed to deduct.
① non-financial enterprises to financial enterprises, interest expenses on borrowing, interest expenses on deposits in financial enterprises, financial enterprises, interest expenses on interbank lending interest expenses approved by the issuance of bonds, deductible;
② non-financial enterprises to non-financial enterprises, interest expenses on borrowing, not more than the amount calculated in accordance with the interest rate of the same period of similar loans in the same financial enterprises, can be deducted accordingly
3 where the enterprise investor in the required period of time is not paid in full the amount of its paid-up capital, the enterprise's external borrowing of interest equivalent to the paid-up capital and in the required period of time the difference between the amount of paid-up capital and the amount of interest payable, shall not be deducted in the calculation of the enterprise's assessable income.
(2) The interest expenses on loans from unrelated internal employees or other personnel of an enterprise shall be deducted in accordance with the provisions of the Tax Law if the borrowing situation meets the following conditions at the same time.
①enterprise and individual lending is real, legal and effective, and does not have the purpose of illegal fund-raising or other violations of laws and regulations;
②enterprise and individual signed a loan contract.
9. Special funds for environmental protection
Enterprises in accordance with relevant provisions of laws and administrative regulations for environmental protection, ecological restoration of special funds, are allowed to deduct. The above special funds withdrawn after the change of use, shall not be deducted.
10. Leasing fees
(1) leased fixed assets leased under operating leases incurred leasing expenses, according to the lease term uniform deduction.
(2) leased fixed assets leased under finance leases, according to the provisions of the value of fixed assets leased under finance leases should be part of the depreciation expense, deducted in installments.
11. Fees and commissions
(1) January 1, 2019 onwards, insurance companies incur fees and commissions related to their business activities, shall not exceed 18% of the balance of the year's total premium income after deducting the surrender premiums and other (including this number) part of the calculation of taxable income is allowed to be deducted; more than the part of the deduction is allowed to be carried forward to future years.
(2) Other enterprises are limited to 5% of the amount of revenue recognized in service agreements or contracts with intermediary service agencies or individuals (excluding both parties to the transaction and their employees, agents and representatives, etc.) with legal business qualifications.
(3) special provisions that allow for actual deduction: enterprises engaged in agency services, the main business income of fees and commissions (such as securities, futures, insurance agents and other enterprises), the actual incurred operating costs (including fees and commissions) to obtain such income, are allowed to be deducted before the enterprise income tax according to the actual deduction.
12. Other Deductible Expenses
(1) Reasonable labor protection expenditures incurred by an enterprise are allowed to be deducted.
(2) Exchange losses incurred by an enterprise are allowed to be deducted, except for those that have been included in the cost of the relevant assets and those that are related to the distribution of profits to the owners.
(3) Depreciation of fixed assets and amortization of intangible assets and deferred assets are deductible.
(4) Deductions are allowed for membership fees, reasonable conference fees, travel expenses, liquidated damages, and litigation expenses.
(5) state-owned enterprises (including wholly state-owned, wholly-owned and state-owned capital, absolute control, relative control of enterprises) included in the management costs of the party organization work funds, the actual expenditure does not exceed 1% of the total annual wages and salaries of employees, can be deducted according to the actual enterprise income tax; non-public enterprises, party organizations and trade unions included in the management costs of the enterprise to be expensed, does not exceed 1% of the total annual wages and salaries of employees, can be deducted. 1% of the part can be deducted.