培训课程
Income tax on corporate business (EIT) 3
4. NON-DEDUCTIBLE EXPENSES
The tax laws prohibit he deduction of the following items:
Capital expense, such as purchase or construction of fixed assets, acquiring or developing intangible assets, cost of investment. See more in the section 5 set at
below.
Fines, penalties or interest on overdue tax or confiscation are not deductible if they are resulted from committing an offence under the laws. Therefore interest
on overdue bank loan is tax deductible.
The portion of losses suffered from natural disasters or accidents that can be recovered from the insurance company.
Donations that are not for the business operation of the taxpayer. e.g. donations to the public welfare institute established outsides China is not tax deductible. However, for donation by non-financial enterprise to public welfare institute established within China, the maximum deductible limit is the lower of 3% of the taxable income before donation and the actual amount of donation.
One important point to be remembered is that the donation directly paid to the receiver is not deductible. To be deductible, it must be paid through the social group or institute approved by the government in PRC to the particular donator. The approved ones include the Hope Project Foundation, the Chinese Red Cross, the Song Qing Ling Foundation, and the Chinese Federation of the Handicapped.
For the housing that were sold to the employees, since the legal title of the house is no longer belonging to the employers, any expense, e.g. depreciation or maintenance is not deductible.
The kickback to the purchaser by the seller of the goods is not deductible.
The general provision for inventory, impairment of fixed assets and investment are not deductible. However for the provision of bad debt, the tax authority generally approves the maximum provision 0.5% of debtor¡¯s balances as at year- end. Further, the actual bad debt can be deductible if
(i) the debtor is in bankruptcy, liquidated, missing, deceased-or suffered from natural disaster and the debt is irrecoverable from the person or the estate of the deceased
(ii) it is aged over 3 years from the due date and is still outstanding.
However, no provision is allowed for the related company. It is only allowable if the related company is ordered to bankrupt and the debt is for trading purpose.
Loss from the guarantee in favor of other individual that does not incur for the
course of trade.
Any expense of non-business purpose is non-deductible.
An enterprise has RMB 1,800,000 sales income from products, cost of sales RMB 1,000,000, sales tax and surcharge 120,000, management fee RMB300,000, sales expense RMB3O,000, income from interest of national debenture RMB 15,000, net amount of non-operating expenses RMB3O,000. Other expenses include:
I) Total employees¡¯ annual income is RMB 180,000, excluding 17.5% of it for staff welfare, trade union fund and labour education fund. The tax allowable wages of the enterprise for the year is RMB 150,000.
ii) Entertainment expense for the year is RMB3O,000
iii) Non advertisement donation expense RMB35,000
iv) Donation to the approved public welfare institute RMB25,000
Calculate the taxable income for the enterprise.
Accounting profits for the enterprise: 1,800,000 - 1,000,000 -. 120,000 - 300.000 - 30,000 ¡À 15,000 - 30,000 = RMB335,000
Tax adjustments:
Non allowable wages 180,000 -- 150,000 RMB3O,000
Non allowable staff welfare, trade union fund and labour education fund 30,000 x
17.5% = RMB5,250.
Non allowable entertainment = 30,000 -(1,800,000 x 5%o) = RMB2I,000
Non advertisement donation expense is non deductible.
Interest of national debenture is non taxable.
Taxable income before the donation: 335,000 + 30,000 + 5,250 + 21,000 + 35,000 --
15,000 + 25,000 = RMB43 6,250
Calculate deductible limit of the donation: 436,250 x 3% = RMB 13,087.5
The taxable income for the enterprise is: 436,250 - I ,3087.5 = RMB423, 162.5
(a The enterprise income tax payable for an enterprise in first year was RMB600,000, the second year RMB 1,000,000. The following events were found for the second year
subsequently:
i) in December of the second year, purchase of fixed assets RMB8O,000 was directly recorded as management fee
ii) collected bad debts RMB900,000 that was written off before but not recorded as income.
iii) non-operating expense included donation for a charity activity of RMB 18,000. iv) The purchase of domestic-made fixed assets to perform research and development for new technology was RMB2,400,000. It was an approved project. Calculate the tax payable for the second year.
The purchase of fixed assets is not allowable. The collection of written off bad debt is taxable. Donation directly to the charity activity is not allowable.
Taxable income = 1,000,000 + 80,000 + 900,000 + 18,000 = RMB 1,998,000 Tax payable = 1,998,000 x 33% = RMB659,340 before the consideration of domestic-made machinery
The maximum allowance for domestic made fixed assets = 2,400,000 x 40% =
RMB96O,000
In second year, the additional tax payable = 659,340 - 600,000 = RMB59,340
Therefore, tax payable for the second year = 659,340 - 59,340 = RMB600,000 and the remaining allowance = 960M00-59,340-- RMB900,660 can be carried forward for next 5 years.
The tax laws prohibit he deduction of the following items:
Capital expense, such as purchase or construction of fixed assets, acquiring or developing intangible assets, cost of investment. See more in the section 5 set at
below.
Fines, penalties or interest on overdue tax or confiscation are not deductible if they are resulted from committing an offence under the laws. Therefore interest
on overdue bank loan is tax deductible.
The portion of losses suffered from natural disasters or accidents that can be recovered from the insurance company.
Donations that are not for the business operation of the taxpayer. e.g. donations to the public welfare institute established outsides China is not tax deductible. However, for donation by non-financial enterprise to public welfare institute established within China, the maximum deductible limit is the lower of 3% of the taxable income before donation and the actual amount of donation.
One important point to be remembered is that the donation directly paid to the receiver is not deductible. To be deductible, it must be paid through the social group or institute approved by the government in PRC to the particular donator. The approved ones include the Hope Project Foundation, the Chinese Red Cross, the Song Qing Ling Foundation, and the Chinese Federation of the Handicapped.
For the housing that were sold to the employees, since the legal title of the house is no longer belonging to the employers, any expense, e.g. depreciation or maintenance is not deductible.
The kickback to the purchaser by the seller of the goods is not deductible.
The general provision for inventory, impairment of fixed assets and investment are not deductible. However for the provision of bad debt, the tax authority generally approves the maximum provision 0.5% of debtor¡¯s balances as at year- end. Further, the actual bad debt can be deductible if
(i) the debtor is in bankruptcy, liquidated, missing, deceased-or suffered from natural disaster and the debt is irrecoverable from the person or the estate of the deceased
(ii) it is aged over 3 years from the due date and is still outstanding.
However, no provision is allowed for the related company. It is only allowable if the related company is ordered to bankrupt and the debt is for trading purpose.
Loss from the guarantee in favor of other individual that does not incur for the
course of trade.
Any expense of non-business purpose is non-deductible.
An enterprise has RMB 1,800,000 sales income from products, cost of sales RMB 1,000,000, sales tax and surcharge 120,000, management fee RMB300,000, sales expense RMB3O,000, income from interest of national debenture RMB 15,000, net amount of non-operating expenses RMB3O,000. Other expenses include:
I) Total employees¡¯ annual income is RMB 180,000, excluding 17.5% of it for staff welfare, trade union fund and labour education fund. The tax allowable wages of the enterprise for the year is RMB 150,000.
ii) Entertainment expense for the year is RMB3O,000
iii) Non advertisement donation expense RMB35,000
iv) Donation to the approved public welfare institute RMB25,000
Calculate the taxable income for the enterprise.
Accounting profits for the enterprise: 1,800,000 - 1,000,000 -. 120,000 - 300.000 - 30,000 ¡À 15,000 - 30,000 = RMB335,000
Tax adjustments:
Non allowable wages 180,000 -- 150,000 RMB3O,000
Non allowable staff welfare, trade union fund and labour education fund 30,000 x
17.5% = RMB5,250.
Non allowable entertainment = 30,000 -(1,800,000 x 5%o) = RMB2I,000
Non advertisement donation expense is non deductible.
Interest of national debenture is non taxable.
Taxable income before the donation: 335,000 + 30,000 + 5,250 + 21,000 + 35,000 --
15,000 + 25,000 = RMB43 6,250
Calculate deductible limit of the donation: 436,250 x 3% = RMB 13,087.5
The taxable income for the enterprise is: 436,250 - I ,3087.5 = RMB423, 162.5
(a The enterprise income tax payable for an enterprise in first year was RMB600,000, the second year RMB 1,000,000. The following events were found for the second year
subsequently:
i) in December of the second year, purchase of fixed assets RMB8O,000 was directly recorded as management fee
ii) collected bad debts RMB900,000 that was written off before but not recorded as income.
iii) non-operating expense included donation for a charity activity of RMB 18,000. iv) The purchase of domestic-made fixed assets to perform research and development for new technology was RMB2,400,000. It was an approved project. Calculate the tax payable for the second year.
The purchase of fixed assets is not allowable. The collection of written off bad debt is taxable. Donation directly to the charity activity is not allowable.
Taxable income = 1,000,000 + 80,000 + 900,000 + 18,000 = RMB 1,998,000 Tax payable = 1,998,000 x 33% = RMB659,340 before the consideration of domestic-made machinery
The maximum allowance for domestic made fixed assets = 2,400,000 x 40% =
RMB96O,000
In second year, the additional tax payable = 659,340 - 600,000 = RMB59,340
Therefore, tax payable for the second year = 659,340 - 59,340 = RMB600,000 and the remaining allowance = 960M00-59,340-- RMB900,660 can be carried forward for next 5 years.
