State Administration of Taxation, Tax Handling Questions Relevant to Income Tax on Expenses Arising from Controlling Risks or Reducing Future Expenses by Foreign Investment Enterprises Circular

Issued: April 3 2002

Main contents: The Circular prohibits foreign investment enterprises from withdrawing reserves, funds or future expenses, etc. other than bad debt reserves or funds allowed by relevant provisions before income tax (Item One). Also the Circular accepts, for deduction of enterprise income tax, insurance expenses incurred from relevant property or liability insurance policy for controlling risks only if the insurance coverage is within the stipulation of Chinese insurance laws and regulations and the insurance policy is allowed to be purchased from an overseas insurance institution (Item Two).
Related legislation: PRC, Foreign Investment Enterprise and Foreign Enterprise Income Tax Law Implementing Rules, Jun 30 1991, CLP 1991 No.6 p5; State Administration of Taxation, Several Matters on Handling Questions Concerning Thorough Implementation of the Foreign Investment Enterprise and Foreign Enterprise Income Tax Law Circular, 1991 and State Administration of Taxation, Tax Handling Questions Concerning Withdrawal of Foreign Investment Enterprises and Foreign Enterprises for Their Employees of Collective Employee Welfare Type of Expenses Other Than the Three Types of Funds Such as Medical Insurance Circular, 1997