Ministry of Finance and State Administration of Taxation, Circular on the Policy of Deducting Loan Loss Reserves of Financial Enterprises before Enterprise Income Tax

Issued: January 29 2012
Effective: January 1 2011 to December 31 2013

Main contents: The scope of loan assets for which pre-tax allocation of loan loss reserves is permitted shall be as follows:

(1) loans (including mortgage, pledge and guarantee loans);

(2) risk assets that have the features of loans, such as bank card overdrafts, discounts, credit advances (including bank acceptance advances, letter of credit advances and guarantee advances), documentary drafts for imports and exports, interbank loans and lease financing receivables; and

(3) foreign loans for which a financial institution acts as the onlender and bears the responsibility for repaying the loan to the foreign party, including assets such as loans from international financial organisations, foreign buyer credit, foreign government loans, non-tied loans from the Japan Bank for International Cooperation and foreign government mixed loans.