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Q：
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How to deduct the business entertainment expenses related to production and operation activities of the enterprise?
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A：
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According to Article 43 of the Implementation Regulations for Enterprise Income Tax Law of the People’s Republic of China, business entertainment expenses related to production and operation activities incurred by enterprises shall be deducted at 60% of the amount of the expenses, however, the deduction shall not exceed 5 ‰ of the sales (business) income of the current year.
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Q：
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How to deduct business entertainment expenses directly related to the production and operation of individual businesses, sole proprietorships, and partnerships?
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A：
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According to Article 5 of the "Notice of the Ministry of Finance and the State Administration of Taxation on Adjusting the Pre tax Deduction Standards for Personal Income Tax of Private Business Owners, Sole Proprietorship Enterprises And Partnership Enterprises " (Caishui [2008] No. 65), the business entertainment expenses directly related to their production and operations incurred by private business owners, sole proprietorship enterprises, and partnership enterprises in each tax year shall be deducted at a rate of 60% of the amount incurred, but shall not exceed 5‰ of the current year's sales (operating) income.
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Q：
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Can the business entertainment expenses related to the preparation activities incurred by the enterprise during the preparation period be deducted?
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A：
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According to Article 5 of the Announcement of the State Administration of Taxation on Several Tax Treatment Issues Concerning the Taxable Income of Enterprise Income Tax (Announcement No. 15 of 2012 of the State Administration of Taxation), the business entertainment expenses incurred by enterprises during the preparation period related to the preparation activities can be included in the enterprise preparation expenses at 60% of the actual amount, and deducted before tax in accordance with relevant regulations.
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Q：
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When calculating the deduction limit for business entertainment expenses, does the company include the amount of deemed sales revenue in its sales revenue?
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A：
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According to Article 1 of the "Notice of the State Administration of Taxation on Several Tax Treatment Issues in the Implementation of Enterprise Income Tax" (Guoshuihan [2009] No. 202), when calculating the deduction limit for expenses such as business entertainment expenses, advertising expenses, and business promotion expenses, the sales (operating) income of enterprises should include the deemed sales (operating) income amount stipulated in Article 25 of the Implementation Regulations for Enterprise Income Tax Law of the People’s Republic of China.
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Q：
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Can the specific income of equity investment enterprises be included in the pre-tax deduction limit for business entertainment expenses?
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A：
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According to Article 8 of the Notice of the State Administration of Taxation on Several Tax Issues Concerning the Implementation of the Enterprise Income Tax Law (Guoshuihan [2010] No. 79), for enterprises engaged in equity investment business (including group company headquarters, venture capital enterprises, etc.), the deduction limit for business entertainment expenses can be calculated according to the prescribed proportion of dividends, profit distribution, and equity transfer income distributed from the invested enterprises.
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