Welfare are the help benefit that enterprises provided to employees to improve their life quality by building collective facilities, distributing various subsidies and providing services. Employee welfare include collective welfare and individual welfare, mainly the former. Usually collective welfare is free or preferential treatment (include low charge) just like subsidies, which can meet the common needs of employees by consumption method, such as dormitory, shower room and canteen, and every employee has equal access. Individual welfare is to provide necessary subsidies to individual employees for special life difficulties, which generally paid to employees directly, such as living hardship allowances.

1.       Deduction limit of welfare expenses

Welfare expenses can be deducted before calculation of Corporate Income Tax at 14% of reasonable gross salary. “Reasonable” means the actual payment to employees according to salary regulations established by shareholder’s conference, board of directors and remuneration committee. Reasonable salary can be verified by following principals:

(1)	Enterprises have formulated standard salary system for employees;
(2)	The salary system is in line with industrial and regional level;
(3)	The salary payment is relatively fixed during a certain period, the adjustments of salary are carried out in an orderly way;
(4)	Enterprises have fulfilled the obligation of withholding IIT for the actual salary payment;
(5)	The salary arrangement is not for the purpose of lowering or evading taxes.

Gross salary means the total amount of actual salary payment, not including welfare, personnel education fund, labour union expenditure, pension insurance, medical insurance, unemployment insurance, employment injury insurance, maternity insurance and housing fund.

2.       The range of welfare expenses stipulated by tax law
   

(1)	For enterprises whose social function is not yet separated, the costs of equipment, facilities and manpower in internal welfare department belong to welfare expenses, including equipment/facilities procurement and maintenance costs for staff canteen, shower room, clinic, nurseries, nursing homes, and basic salary, social insurance premium, housing provident fund of employees that work in welfare department.
(2)	Various subsidies and non-monetary benefits paid for employee’s health care, living, housing, transportation, including out-of-town medical subsidy on business trip, medical subsidy for enterprises of no medical system, medical subsidy for employee’s immediate relatives, heating allowance, heatstroke prevention subsidy, living hardship allowance, relief fund, subsidy for staff canteen expense, transportation allowance, etc.
(3)	Other welfare expenses including death grant, resettlement expense, transportation allowance for home leave, etc.

  

3.       Items as following are not within the scope of welfare:

(1)	Salary payment and other expenses for retiree;
(2)	Severance compensation for laid-off employees;
(3)	Labour protection fees;
(4)	Allowances paid to employees during the period of sick leave, maternity leave and home leave;
(5)	Employee’s training expenses;
(6)	Employee’s meal allowance (include lunch allowance and travel allowance).