Home Knowledge China China Taxes Corporate Taxes Provisions on Expenses Deductions Before Enterprise Income Tax in China
(1) |
Employee medical expenses |
(2) |
Employees' living hardship allowances refer to the regular subsidies and temporary subsidies actually paid to employees with living difficulties. Including living allowances for injuries or disabilities due to work or non-work |
(3) |
Death benefits for employees and their dependent immediate family members |
(4) |
Subsidies for collective welfare, including subsidies for the difference between expenditure and income of collective welfare facilities such as staff bathrooms, barber rooms, laundry rooms, nursing rooms, nurseries, nurseries, etc., as well as childcare allowances for unused nurseries and repair costs paid to employees. |
(5) |
Other welfare benefits mainly refer to welfare expenses in terms of transportation subsidies, family planning subsidies, hospital meals, etc. |
(1) |
General Deduction Ratio The part of the education expenses incurred by the enterprise that does not exceed 8% of the total wages and salaries shall be allowed to be deducted when calculating the taxable income. The excess part shall be allowed to be carried forward in the following tax year. |
(2) |
The Deduction Ratio of Enterprises in Specific Industries
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(1) |
General deduction ratio The proportion of eligible advertising expenses and business promotion expenses incurred by the enterprise, unless otherwise stipulated by the competent financial and taxation departments under the State Council, shall not exceed 15% of the sales (business) income of the current year, and the excess part shall be allowed to carry forward the deduction in the subsequent tax year. |
(2) |
Deduction ratio for special industries
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(1) |
General deduction ratio The handling fee and commission expenses related to production and operation incurred by an enterprise are calculated at 5% of the amount of revenue recognized in the service agreement or contract signed with an intermediary service agency or individual with legal business qualifications (excluding the parties to the transaction and their employees, agents, and representatives, etc.). |
(2) |
Deduction ration for enterprise engaged in real estate development and operation business The deduction shall be granted if the enterprise entrusts an overseas institution to sell development products, and the portion of the sales expenses (including commissions or handling fees) paid by the overseas institution does not exceed 10% of the entrusted sales revenue. |
(3) |
Deduction ratio for the insurance industry The part of the insurance enterprise that incurs handling fees and commission expenses related to its business activities, which does not exceed 18% (including the principal amount) of the balance of the total premium income of the current year after deducting the surrender fee, etc., shall be allowed to be deducted when calculating the taxable income. The excess part shall be allowed to carry forward the deduction for subsequent years. |
(1) |
General deduction ratio Where the R&D expenses actually incurred by an enterprise in carrying out R&D activities are not included in the profit or loss of the current period, based on the deductions in accordance with the provisions, between January 1, 2018, and December 31, 2023, an additional deduction 75% of the actual amount incurred can be deducted. If intangible assets are formed, they are amortized before tax at 175% of the cost of intangible assets during the above period. |
(2) |
Deduction ratio of manufacturing enterprises Where the R&D expenses actually incurred by manufacturing enterprises in carrying out research and development activities are not included in the profit or loss of the current period based on the actual deductions in accordance with the regulations. From January 1, 2021, an additional deduction 100% of the actual amount incurred can be deducted. If intangible assets are formed, they will be amortized before tax at 200% of the cost of intangible assets from January 1, 2021. |
(1) |
Interest expenses to financial enterprises Reasonable borrowing expenses incurred by enterprises in production and operation activities that do not need to be capitalized shall be deducted. Where an enterprise borrows money for the acquisition or construction of fixed assets or intangible assets and inventory that has been constructed for more than 12 months to reach a predetermined saleable state, the reasonable borrowing expenses incurred during the purchase or construction of the relevant assets shall be included as capital expenditures in the cost of the relevant assets and deducted in accordance with the provisions of these regulations. |
(2) |
Interest expenses to non-financial institutions When the following conditions have been met at the same time, the interest expenses on inter-enterprise loan can be deducted:
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(3) |
Interest expenses to individuals Interest expenses borrowed by an enterprise from internal employees or other personnel, and their borrowing conditions meet the following conditions, and their interest expenses do not exceed the amount calculated according to the interest rate of similar loans of the financial enterprise for the same period, and the deduction is granted in accordance with Article 8 of the Tax Law and Article 27 of the Implementing Regulations of the Tax Law.
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Expense item |
Deduction Criteria |
Taxable income adjustments |
Wages and salaries |
Full deduction |
No Adjustment |
Employee welfare |
The part that does not exceed 14% of the total salary and salary |
Increase taxable income |
Employee education funds |
General: the part that does not exceed 8% of the total salary and salary shall be deducted in the following years |
Increase taxable income for current period |
Integrated circuit design enterprises and eligible software enterprises separately account for the full deduction |
No Adjustment |
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Eligible animation enterprises shall be separately accounted for and deducted in full |
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The training cost of power plant operators of Heli Power Generation Enterprises shall be deducted in full separately |
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The air service training expenses of aviation enterprises shall be fully deducted |
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Trade union funds |
The part that does not exceed 2% of the total salary and salary |
Increase taxable income |
Supplementary pension insurance and supplementary medical insurance |
Separately, within the standard of not more than 5% of the total salary of the employee |
Increase taxable income |
Entertainment fee |
The actual amount of 60% is less than 4‰ of the sales revenue of the current year |
Increase taxable income |
Advertising costs and business promotion costs |
General: the part not exceeding 15% of the sales revenue of the current year, the excess part is deducted in the following years |
Increase taxable income for current period |
Cosmetics manufacturing or sales, pharmaceutical manufacturing and printing manufacturing enterprises, not more than 30% of the sales revenue of the current year, more than the deduction in subsequent years |
Increase taxable income for current period |
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Tobacco companies are not allowed to deduct |
Increase taxable income in full |
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Fees and commissions |
General: Within 5% of the amount of revenue recognized by the agreement or contract |
Increase taxable income |
Real estate development enterprise: entrust overseas institutions to develop No more than 10% of the entrusted sales revenue paid to overseas institutions |
Increase taxable income |
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Insurance industry: not more than 18% of the balance of the current year's premium income after deducting surrender payments. The excess part is deducted in subsequent years. |
Increase taxable income for current period |
Expense item |
Deduction Criteria |
Taxable income adjustments |
R& D expenses |
General: No intangible assets are formed, plus 75% deduction. Form intangible assets, amortized at 175% before tax. |
Decrease taxable income |
Manufacturing enterprises: No intangible assets, plus 100% deduction the formation of intangible assets, according to 200% pre-tax amortization |
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Donations for the benefit of the public |
The part of the total annual profit that is less than 12%. The excess is deducted for three years after the partial carry-forward |
Increase taxable income for current period |
Corporate Liability Insurance |
Full deductions |
No adjustment |
Interest on borrowings |
Full deduction of interest on borrowings from financial enterprises |
No adjustment |
The interest on borrowings from non-financial institutions shall not exceed the amount calculated at the interest rate of the same type of loan of the financial enterprise for the same period |
Increase taxable income |
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Loans between affiliated enterprises, debt-to-capital ratio: Financial enterprises: 5:1 Other enterprises: 2:1 |
Increase taxable income |
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Interest on borrowings from individuals is deducted in full and eligible |
No adjustment |
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