Firstly, the management of Enterprise Income Tax Preferences was further standardized. The types of preferences included in the management of enterprise income tax preferences include: tax-exempt income, regular tax reduction and exemption, preferential tax rate, additional deduction, deduction of taxable income, accelerated depreciation, reduction of income, tax credit and other special preferential policies. Enterprise income tax exemptions and reductions are subject to approval and management as follows: enterprise income tax transitional preferential policies specified by the State Council, original enterprise income tax preferential policies that continue to be retained for implementation after the implementation of the new tax law, preferential enterprise tax exemptions and reductions for enterprises in national autonomous areas as stipulated in Article 29 of the new Enterprise Income Tax Law, and enterprise income tax preferential policies that are subject to approval and management as otherwise stipulated by the State Council (at present, these include the tax concessions for western development and the tax concessions for re-employment of laid-off workers). (at present, mainly including tax incentives for western development and tax incentives for layoff and re-employment). The filing and management of enterprise income tax is divided into two types: prior filing and subsequent filing. Taxpayers are not allowed to enjoy tax preferences if they are required to file with the tax authorities in advance but fail to do so in accordance with the regulations. For matters filed after the fact, taxpayers may enjoy tax incentives on their own and attach relevant information to the annual tax return. However, if the tax authorities do not meet the conditions after examination, the taxpayers shall cancel the tax concessions they enjoy on their own and recover the corresponding taxes.
Secondly, the transitional provisions of the new and old preferential policies have been clarified. First, where there are cross-cutting circumstances between the transitional preferential policies on enterprise income tax and the regular tax exemptions and reductions of tax rates stipulated in the Enterprise Income Tax Law and its implementing regulations, the enterprise can only choose the most preferential policies to be implemented, and shall not enjoy them on top of each other, and shall not be allowed to change them once they are chosen. However, the tax incentives stipulated in the Enterprise Income Tax Law and its implementing regulations can be enjoyed at the same time where the enterprise meets the prescribed conditions. Secondly, if the branch set up by the enterprise before March 16, 2007 has enjoyed the relevant tax preferences based on the preferential provisions of the original domestic and foreign-funded enterprise income tax law alone, any enterprise that meets the policy conditions set out in Document No. 39 of the State Council [2007] may enjoy the transitional preferential policies on enterprise income tax as set out in Document No. 39 alone. Apart from that, all preferential policies under the new Enterprise Income Tax Law shall be enjoyed uniformly by corporate taxpayers. For example, for productive foreign-invested enterprises with operation period of more than 10 years, the preferential policies of "two exemptions and three halves" can be applied by the branch established before March 16, 2007 to enjoy individually from the profit-making year onwards. Thirdly, enterprises enjoying transitional preferential policies and preferential policies for the development of the western region may be taxed at half the taxable amount calculated in accordance with the applicable tax rate of the enterprise during the half-period of the regular tax reduction or exemption. Other than that, all other types of regular tax exemptions and reductions shall be taxed at half the taxable amount calculated according to the statutory enterprise income tax rate of 25%.
Thirdly, the specific application regulations of individual preferential policies are further refined. The enterprise shall deduct 100% of the wages paid for the employment of disabled persons, "three exemptions and three halves" of the investment and operation income of enterprises engaged in public *** infrastructure projects supported by the state, 10% reduction of the income of qualified products produced by enterprises utilizing resources in a comprehensive manner, and 10% reduction of the income from qualified technology transfer of resident enterprises. The eligibility conditions for specific application of preferential policies such as reduction and exemption of enterprise income tax, accounting standards, preferential time, filing procedures, legal liability and follow-up management have been specifically detailed, providing operational guidelines for taxpayers to apply for and grassroots implementation of relevant preferential policies.
Fourth, it is clarified that enterprises with authorized levies are not allowed to enjoy the tax incentives for small and micro-profit enterprises. The small and micro-profit enterprise tax incentives apply to enterprises that have the ability to build accounts to account for their own taxable income. Approved collection of enterprise income tax enterprises, in the absence of accurate accounting of taxable income conditions, the small micro-enterprise preferential tax rate is not applicable. In terms of the conditions for the identification of small micro-profit enterprises, the number of employees refers to the sum of the number of employees who have established labor relations with the enterprise and the number of labor dispatch employees accepted by the enterprise. The indicators of the number of employees and total assets are determined by the average monthly value of the enterprise throughout the year.
(2) Pre-tax Deduction Policy
First, the concept and principle of "reasonable wages and salaries" have been clarified. "Reasonable wages and salaries" refers to the wages and salaries actually paid to employees in accordance with the provisions of the wage and salary system formulated by the shareholders' general meeting, the board of directors, the remuneration committee or the relevant management organization. Specific principles include: the enterprise has formulated a relatively standardized wage and salary system for its employees; the wage and salary system formulated by the enterprise is in line with the industry and regional level; the wages and salaries paid by the enterprise for a certain period of time are relatively fixed and the adjustments of the wages and salaries are carried out in an orderly manner; the enterprise has fulfilled its obligation of withholding and paying the individual income tax on behalf of the employees for the actual payment of the wages and salaries in accordance with the law; and the relevant wage and salary arrangements are not made with the purpose of reducing or evading the payment of taxes. The arrangement of salary and wages is not aimed at reducing or avoiding the payment of tax.
Secondly, the scope of "employee welfare expenses" is clarified for the first time from the perspective of taxation. Employee welfare expenses of enterprises include the following: (1) equipment, facilities and personnel expenses incurred by the welfare departments of enterprises that have not yet implemented the separation of the function of running a society, including the equipment, facilities and repair and maintenance expenses of the collective welfare departments such as staff canteens, staff bathrooms, hairdressing salons, medical clinics, nurseries, nursing homes, etc., and the wages and salaries of staff in the welfare departments, social insurance premiums, housing provident funds, labor costs, etc. (ii) Subsidies and non-monetary benefits granted to employees for health care, living, housing, transportation, etc., including expenses granted by enterprises to employees for medical treatment outside of the enterprise on official business, medical expenses for employees of enterprises that do not have medical care co-ordination, medical subsidies for employees' dependent immediate family members, subsidies for heating costs, summer heat-prevention and cooling costs for employees, subsidies for employees' difficulties, relief expenses, subsidies for employees' canteen expenses, and subsidies for employees' transportation. (iii) Other employee welfare expenses incurred in accordance with other regulations, including funeral subsidies, pension expenses, settlement expenses, and family leave travel expenses.
Thirdly, relevant systems and methods for pre-tax deduction of asset losses have been introduced. On the basis of the Notice on the Policy of Pre-tax Deduction of Enterprise Asset Losses (Cai Shui [2009] No. 57) issued by the Ministry of Finance and the State Administration of Taxation, the State Administration of Taxation issued the Notice on the Issuance of Administrative Measures for Pre-tax Deduction of Enterprise Asset Losses (Guoshifa [2009] No. 88), which clarifies the administrative provisions for pre-tax deduction of enterprise asset losses under the new Enterprise Income Tax Law. The new measures are procedurally divided into self-calculated deductions and approvals for asset losses, and the exclusion method has been adopted to determine the items that need to be approved for deduction. That is to say, except for the six types of losses incurred by enterprises due to the sale, transfer and realization of assets in normal operation and management activities, which can be deducted by self-calculation, the rest of the asset losses need to be examined and approved by the tax authorities before they can be deducted. From the time limit, the new approach to shorten the approval of the statutory time limit, compared with the State Administration of Taxation Decree No. 13, from the original provincial tax authorities to approve the time limit of 60 days to 30 days, the maximum number of tax authorities below the provincial level can not exceed 30 days. The statutory "extension period" has been extended from 10 days to 30 days. At the same time, the deadline for taxpayers to file returns has been extended from 15 days to 45 days after the original year. This puts higher requirements on the approval of the tax authorities, giving taxpayers more time to declare pre-tax deductions.
Fourth, it determines the reserves that can be deducted before tax and their conditions. The new Enterprise Income Tax Law stipulates that no pre-tax deduction shall be made for unauthorized reserve expenditures, i.e., reserve expenditures for asset impairment and risk provisions that do not comply with the regulations of the Ministry of Finance and the State Administration of Taxation (SAT). At present, the Ministry of Finance and the State Administration of Taxation have approved that the securities industry, insurance industry and financial enterprises can make provisions in accordance with the law and allow pre-tax deduction for the provisions that comply with the regulations.
Fifth, the policy on deduction of handling fee and commission expenses has been clarified. The handling fee and commission expenses related to the production and operation of enterprises, property insurance enterprises according to the current year's total premium income after deducting the surrender premiums, etc. within 15% (including, the same below), life insurance enterprises according to the current year's total premium income after deducting the surrender premiums, etc. within 10% of the balance of the income, other enterprises according to the agreement or contract recognized by the income of the amount of up to 5%, will be allowed to pre-tax deduction, more than the portion of the deduction, shall not be deducted. Meanwhile, except for entrusting individual agents, handling fees and commissions paid by enterprises in cash and other non-transferable means are not deductible before tax. Handling fees and commissions paid by enterprises to relevant securities underwriting organizations for the issuance of equity securities shall not be deducted before tax. Enterprises are not allowed to include handling fees and commissions expenses in rebates, business commissions, rebates, entrance fees and other expenses.
Sixth, the standards for supplementary pension insurance premiums and supplementary medical insurance premiums have been clarified. The new Enterprise Income Tax Law and its implementing regulations stipulate that the supplemental pension insurance premiums and supplemental medical insurance premiums paid by an enterprise for its investors or employees shall be allowed to be deducted within the scope and standard stipulated by the competent departments of the State Council in charge of finance and taxation. Starting from January 1, 2008, the supplemental pension insurance premiums and supplemental medical insurance premiums paid by enterprises for all employees serving or employed in the enterprise in accordance with the relevant state policies and regulations shall be allowed to be deducted in calculating taxable income to the extent that they do not exceed the standard of 5% of the total wages of the employees, and no deduction shall be made for the portion exceeding the standard.
(C) Special Tax Treatment
First, it is clarified that general and special tax treatment provisions are applicable to enterprise reorganization according to different situations. In terms of the division between "general" and "special", clear boundaries have been established, and the requirements for "special" are higher than those of the original provisions. For example, the proportion of equity payment in the transaction consideration of special reorganization shall not be less than 85% of the total amount of the transaction payment, which is 5 percentage points higher than the original provisions. (In terms of income tax treatment, special reorganization, which was called "tax-free reorganization" in the past provisions, shall be temporarily not recognized on the basis of taxable cost of the enterprise's assets and equity, and the equity portion of payment shall be recognized on the basis of taxable cost of the enterprise's assets and equity. When the restructuring transaction occurs, the part of the equity payment is based on the original cost of the enterprise's assets and equity, and gains and losses from the transfer of the assets and equity are not recognized for the time being, which means that no tax is payable for the time being, or the tax obligation is deferred to a later date.)
Secondly, it clarifies the income tax treatment of enterprise liquidation business. First, the liquidation period shall be calculated as a separate tax year to determine the taxable income, regardless of whether the liquidation period is actually longer or shorter than 12 months; second, the liquidation income shall be the balance of the realizable value of all the assets of the enterprise or the transaction price, less the tax basis of the assets, the liquidation expenses, the relevant taxes, plus the gain or loss on the settlement of debts, etc.; and, again, the shareholders of the enterprise being liquidated shall be entitled to share the The amount of the remaining assets of the liquidated enterprise, which is equal to the portion of the accumulated undistributed profits and accumulated surplus reserves of the liquidated enterprise calculated in proportion to the shares held by such shareholder, shall be recognized as dividend income and exempted from enterprise income tax; and the balance of the remaining assets, less the dividend income, shall be recognized as the shareholders' income or loss from the transfer of investments. Finally, the liquidation proceeds can make up for prior years' losses.
Thirdly, the regulations on enterprise income tax treatment of real estate development and operation business have been further adjusted. The State Administration of Taxation (SAT) issued the Measures for Enterprise Income Tax Treatment of Real Estate Development and Operation Businesses (Guo Shui Fa [2009] No. 31), which solves the problem of how real estate development enterprises are taxed under the new Enterprise Income Tax Law. Compared with the original policy, the following points are worth focusing on: firstly, the taxable gross profit margin was lowered by 5 percentage points. In the current real estate market downturn, in addition to affordable housing and other projects, the enterprise sales of unfinished development products to obtain income taxable gross profit margin, compared with the State Taxation Development [2006] No. 31 document, the general development project taxable gross profit margin from 20%, 15%, 10% down to 15%, 10%, 5%, each class is reduced by 5 percentage points. Secondly, it clarifies that the period expenses incurred by enterprises, taxable costs of sold development products, business tax and surcharges, and land value-added tax are allowed to be deducted in the current period in accordance with the regulations. Finally, it continues to emphasize that no prior approval of levy is allowed. Enterprises appearing in the circumstances stipulated in Article 35 of the Law on Administration of Tax Collection, the tax authorities may collect and manage the enterprise income tax payable by them in the past according to the approved collection method and gradually standardize it, and at the same time, deal with it in accordance with the provisions of the Law on Administration of Tax Collection and other tax laws and administrative regulations, but shall not determine in advance that the enterprise's income tax is to be collected and managed in accordance with the approved collection method.
Fourth, the enterprise income tax treatment of enterprises obtaining special-purpose fiscal funds has been clarified. For the period from January 1, 2008 to December 31, 2010, the fiscal funds obtained by enterprises from the financial departments and other departments of the people's governments at or above the county level, which should be included in the total income, can be regarded as non-taxable income and be deducted from the total income when calculating the taxable income, if the following three conditions are met: firstly, the enterprises are able to provide the documents on the allocation of the funds and the documents stipulate that the funds are for the special purpose; secondly, the financial department or other governmental department that allocated the funds has special fund management methods or specific management requirements for the funds; thirdly, the enterprise accounts for the funds and the expenditures incurred with the funds separately.
Fifth, the period of preferential income tax policy for cultural enterprises has been extended. The original policy of cultural enterprise income tax concessions in the implementation of the end of 2008 expired, Cai Shui [2009] No. 31, Cai Shui [2009] No. 34 document, from January 1, 2009 to December 31, 2013, the operating cultural institutions converted to enterprises, since the date of registration of the conversion, continue to be exempted from enterprise income tax. At the same time, publishing and distributing enterprises with stagnant publications in stock, paper books for more than 5 years (including the year of publication, the same hereinafter), audio-visual products, electronic publications and films (including microforms) for more than 2 years, and paper periodicals and wall calendars for more than 1 year, can be deducted as property losses before tax. If the dull publications that have been deducted as property losses before tax are disposed of in subsequent years, the disposal income shall be included in the taxable income of the year of disposal.
Sixth, other special provisions. For the opening (preparatory) expenses, the enterprise can be a one-time deduction in the year of the date of commencement of business, or in accordance with the new Enterprise Income Tax Law on the treatment of long-term amortized expenses, but once selected, shall not be changed. Donations made by enterprises for specific matters such as post-Wenchuan earthquake reconstruction and the organization of the Beijing Olympic Games and the Shanghai World Expo can be deducted in full according to the facts, i.e., such donations for specific matters are not subject to the influence of the profits of the enterprises, and those that are not sufficient to be deducted can also be carried forward indefinitely for deduction. Software companies can accurately classify the staff training costs, not subject to the limitations of the deduction standards for staff education expenses, can be fully deducted.