1. Types of non-taxable Income
   
   The total taxable income of CIT includes taxable income, non-taxable income and exempt income. Among them, non-taxable income mainly includes government appropriations, administrative fees collected in light of laws and managed by financial authorities, government-managed funds and other non-taxable income as stipulated by the State Council of China.
   
   

   (1)	Government appropriations Government appropriations refer to financial funds allocated by Chinese government at allof different levels to public institutions, social goups and other organizations that are under budget management. For example, the special funds allocated by the government for the purchase orand technological transformation of fixed assests, the incentive funds forto encouranginge the enterprises for settlement ofto settle employees, the grain quota subsidies, the R&D funds for the enprises to carry out research and development activities, etc., they are all fiscal apropriations. * Government appropriations include VAT directly reduced or exempted and taxes that are levied and refunded immediately, levied first and refunded later, but exclude the export tax rebates are exclusive.
   (2)	Administrative fees collected in light of laws and managed by financial authorities Administrative fees refer to the charges collected by state organs, public institutions, social groups and other organizations that perform governmental functions on behalf of the government in the process when they or provideding specific services to citizens and corporate organizations in accordance with relevant laws and administrative regulations. Such as resource compensation charges, examination charges and so on.
   (3)	Government-managed funds Government-managed funds refer to the financial funds of special purposes collected by enterprises on behalf of the government. Such as railway construction fund, port construction fund, civil aviation funds and so on.
   (4)	Other non-taxable income as stipulated by the State Council of China. It refers to the financial funds of special purposes obtained by enterprises and submitted to the State Council of China for approval by the competent financial and taxation department under the State Council.

   
   
2. Recognition of non-taxable income
   
   The fiscal funds obtained by enterprises from financial or other departments at or above the county-level  that shall be calculated as taxable income. It may be regarded as non-taxable income and deducted before calculation of ng CIT provided that the funds meet the following conditions at the same time:
   
   

   (1)	Enterprises can provide funds appropriation documents that specified the special usages;
   (2)	Financial or other department have special management methods or specific management requirements for the funds;
   (3)	Enterprises perform a separate accounting for the funds and the expenses incurred.

   
   * Expenses incurred from non-taxable income shall not be deducted in calculation of taxable inome.; The depreciation and amortization of assets incurred from non-taxable income shall not be deducted in calculation of taxable inome.; Expenses or intangible assets arising from the use of non-taxable income in research and development activities shall not be additionally deducted or amortized.
   
   *  If the financial funds has been recorded as non-taxable income but not spent and returned to the government within 5 years, the part of which shall be calculated as taxable income at the sixth year. The expenses incurred from the financial funds that recorded as taxable income are allowed to be deducted in the calculation of taxable income.
   
   

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