Circular of State Administration of Taxation (SAT) on Printing and Distribution of the Administrative Measures for the Approval of Utilization of Tax Losses before Levying Enterprise Income Tax (EIT)

Circular of State Administration of Taxation (SAT) on Printing and Distribution of the < Administrative Measures for the Approval of Utilization of Tax Losses before Levying Enterprise Income Tax (EIT) >

Guo Shui Fa [1997] No. 189

December 16, 1997

The State and local tax authorities of all provinces, autonomous regions, municipalities directly under the Central Government and cities under separate state planning:

In order to further regulate and improve the approval system for utilization of tax losses before levying EIT, and to strictly approve the deduction of tax losses before levying EIT, SAT has formulated the Administrative Measures for the Approval of Utilization of Tax Losses before Levying EIT, now we print and distribute to you these measures, please implement them accordingly.

Appendix:
Administrative Measures for the Approval of Utilization of Tax Losses before Levying EIT

Pursuant to the Provisional Regulations of the People's Republic of China on Income Tax, in order to intensify the EIT collection and administration, and to regulate the approval and utilization of tax losses before levying EIT, these measures are specially formulated.

I. Applicable scope of utilization of tax losses before levying EIT
According to Article 11 of the Interim Regulations of the People's Republic of China on Enterprise Income Tax, current year losses of taxpayers who maintain independent accounting records and file income tax returns, accounting statements and other information with the relevant tax authorities according to the regulations, can be carried forward to offset the taxable income of the following year; if the taxable income of the following tax year is not enough to offset such losses, then the excess losses can be carried forward up to a maximum of 5 years.

II.
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