State Administration of Taxation, Announcement on Several Tax Treatment Issues Relating to Taxable Income for Enterprise Income Tax Purposes
国家税务总局关于企业所得税应纳税所得额若干税务处理问题的公告
May 31, 2012 | BY
clpstaff &clp articles &Clarification on the pre-tax deduction of business entertainment expenditures for the enterprise preparatory period.
Issued: April 24 2012
Effective: as of the tax year of 2011
Main contents: The reasonable expenses and expenditures incurred by an enterprise in connection with financing obtained by means such as the issuance of bonds, taking out of a loan and attraction of deposits of the insured shall be included as part of the relevant asset costs, provided that they satisfy capitalisation conditions. If they do not satisfy capitalisation conditions, they shall be treated as financial expenses and may be deducted before enterprise income tax as actually incurred (Article 2).
If an enterprise engages in the provision of agency services and the revenue from its main business is in the form of service charges and/or commissions(e.g. a securities, futures or insurance agency enterprise), the operating costs (including service charge and commission expenditures) that it actually incurs in order to obtain such revenue may be deducted before enterprise income tax (Article 3).
The business entertainment expenditures incurred in connection with preparatory activities by an enterprise during its preparatory period may be included as part of its start-up costs at 60% of the amount actually incurred and deducted pre-tax in accordance with relevant provisions; and advertising expenses and business publicity expenses may be included in the enterprise's start-up costs as actually incurred and deducted pre-tax in accordance with relevant provisions (Article 5).
When an enterprise discovers that an expenditure actually incurred in a previous year that, in accordance with tax provisions, ought to have been deducted before enterprise income tax was not or was not completely deducted, it shall, after producing a report thereon and giving an explanation, be permitted to retroactively calculate and deduct the same for the year in which it was incurred provided that the retroactive confirmation period does not exceed five years.
If an enterprise overpaid enterprise income tax for the reason set forth above, it may deduct the same from the enterprise income tax payable for the year in question, and if it cannot be fully deducted for that year, may deduct the outstanding amount from subsequent years or apply for a tax refund.
An enterprise in deficit that retroactively confirms an expenditure that was not deducted before enterprise income tax in a previous year, or an enterprise that made a profit that realises a deficit after retroactive confirmation, shall first adjust the amount of the loss for the year in which the expenditure was incurred and then calculate its overpayment of enterprise income tax for subsequent years based on the principle for making up losses, and effect treatment in accordance with the preceding paragraph (Article 6).
The non-taxable income obtained by an enterprise that failed to carry out management in accordance with the Circular on Enterprise Income Tax Treatment Issues Relating to Fiscal Funds for Dedicated Purposes shall be treated as taxable revenue and be included in the enterprise's taxable income, and enterprise income tax shall be paid thereon in accordance with the law (Article 7).
Pursuant to Article 21 of the Enterprise Income Tax Law, an expenditure that has been confirmed in accordance with the financial accounting system and by actual financial accounting treatment may be deducted before enterprise income tax based on the expenditure actually confirmed by accounting treatment, provided that the scope of and criteria for pre-tax deduction specified in the Enterprise Income Tax Law and relevant tax regulations have not been exceeded, and the taxable income then calculated (Article 8).
clp reference:3230/12.04.24promulgated:2012-04-24
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