Implementing Regulations of the Law of the People's Republic of China on Enterprise Income Tax
Implementing Regulations of the Law of the People's Republic of China on Enterprise Income Tax
Implementing Regulations of the Enterprise Income Tax Law of the People's Republic of China
Order of the State Council [2007] No. 512
December 6, 2007
The Implementing Regulations of the Enterprise Income Tax Law of the People's Republic of China, adopted at the 197th Executive Meeting of the State Council on November 28, 2007, are hereby promulgated and shall come into effect as of January 1, 2008.
Premier: Wen Jiabao
Appendix: Implementing Regulations of the Enterprise Income Tax Law of the People's Republic of China
Chapter I General Provisions
Article 1 These Regulations are formulated in accordance with the provisions of the Enterprise Income Tax Law of the People's Republic of China (hereinafter called the "Enterprise Income Tax Law").
Article 2 Individual proprietorship enterprises and partnership enterprises as stated in Article 1 of the Enterprise Income Tax Law refer to the individual proprietorship enterprises and the partnership enterprises established in accordance with the provisions of Chinese laws and administrative regulations.
Article 3 The enterprises established legally within the territory of China, as stated in Article 2 of the Enterprise Income Tax Law, include the companies, public institutions, social organizations, and other organizations with income sources which are established within the territory of China in accordance with Chinese laws and administrative regulations.
The enterprises established in accordance with the laws of a foreign country (region), as stated in Article 2 of the Enterprise Income Tax Law, refer to enterprises and other organizations with income sources which are established in accordance with the laws of the foreign (region).
Article 4 The actual administrative organizations as stated in Article 2 of the Enterprise Income Tax Law refer to the organizations that actually, comprehensively manage and control the production and operation, staff, accounting, property and other aspects of enterprises.
Article 5 The organizations and places as stated in Paragraph 3 of Article 2 of the Enterprise Income Tax Law refer to the organizations and places wherein the production and operation activities within the territory of China are conducted, including:
1. Management offices, business offices, and representative offices;
2. The places used as farms or factories, or for exploitation of natural resources;
3. Places where labor services are provided;
4. Places where the engineer operations like construction, installation, assembly, repair and exploration are conducted; and
5. Other organizations and places wherein other production and operation activities are conducted.
If non-resident enterprises authorize business agents to engage in production and operation activities within the territory of China, including entrusting units or individuals to sign contracts, store goods or deliver goods etc, such business agents shall be deemed as the organization or premise set up by the non-resident enterprises within the territory of China.
Article 6 The incomes as stated in Article 3 of the Enterprise Income Tax Law include the income from selling goods, the income from providing labor service, the income from property transfer, the income from equity investment such as the dividends and bonus, the income from interest, the income from rental, the income from royalty fee, the income from donation and other incomes.
Article 7 The incomes derived from sources in or out of the territory of China, as stated in Article 3 of the Enterprise Income Tax Law, shall be determined in accordance with the following principles:
1. The income from selling goods shall be determined in terms of places where the sales activities happen;
2. The income from providing labor service shall be determined in terms of places where the labor services provide;
3. As to the income from property transfer, if the income from transferring real properties, it shall be determined in terms of the location of the real property; if transferring the movable properties, it shall be determined in terms of the location of the enterprise/organization/place that transfer the movable properties; in the event of transfer of the equity investment assets, it shall be determined in terms of the location of the enterprise accepting the equity investment;
4. For the income from equity investment such as the income from dividend and bonus, it shall be determined in terms of the location of the enterprise distributing the dividend and bonus;
5. For the income from interest, rental and royalty fee, it shall be determined according to the location of the enterprise, organization or place bearing or paying such income; and
6. For other incomes, they shall be determined in terms of the regulations of the competent finance and taxation departments under the State Council.
Article 8 The actual associations as stated in Article 3 of the Enterprise Income Tax Law mean organizations and places established by non-resident enterprises within the territory of China own equities or creditor's rights from which the incomes are obtained, as well as own, manage or control the property from which the incomes are obtained.
Chapter II Taxable Incomes
Section 1 General Provisions
Article 9 The amount of income taxable of enterprise shall be computed on the accrual basis. For the income and expense belonging to the current period, whether they have been received or paid, they shall be recognized as the income and expense in the current period; for the income and expense not belonging to the current period, even if they have been received or paid in the current period, they shall not be recognized as the income and expense in the current period, unless otherwise prescribed in these Regulations and the regulations of the competent finance and taxation departments under the State Council.
Article 10 The loss as stated in Article 5 of the Enterprise Income Tax Law means the negative balance (less than zero) of total income minus tax-exemption income minus various deductions in each tax year in accordance with the provisions of the Enterprise Income Tax Law and these Regulations.
Article 11 The income from liquidation as stated in Article 55 of the Enterprise Income Tax Law means the balance of the realized value of an enterprise's total assets or the transaction price minus net assets value minus liquidating expense and other relevant taxes and fees.
For the part of the residual assets that the investing enterprise has acquired from the liquidated enterprise, which is equal to the total of the accumulative undistributed profit and the accumulative surplus fund of the liquidated enterprise, it shall be recognized as the income from dividend. For the balance of the aforesaid residual assets minus the aforesaid the income from dividend, which is above or below the investment cost, the above or below part shall be respectively recognized as income or loss from the transfer of investment assets.
Section 2 Incomes
Article 12 The currency forms of the income obtained by an enterprise as stated in Article 6 of the Enterprise Income Tax Law include cash, bank deposit, receivable, note receivable, the speculative bonds investment the enterprise intends to possess till they get expired, and exempt of liabilities, etc.
The non-currency forms of the income obtained by an enterprise as stated in Article 6 of the Enterprise Income Tax Law include fixed assets, biology assets, intangible assets, equity investment, inventory, the speculative bond investment the enterprise does not intend to possess till they get expired, labor services and other related equities.
Article 13 An enterprise's acquired non-currency income as stated in Article 6 of the Enterprise Income Tax Law shall be calculated based on the fair value.
The fair value as stated in the preceding paragraph means assets' value determined by market price.
Article 14 The incomes from selling goods as stated in Item 1 of Article 6 of the Enterprise Income Tax Law mean the incomes the enterprise has acquired through selling the commodities, the goods, the raw materials, the packaging, the low-value consumables, and other inventories.
Article 15 The incomes from providing the labor services as stated in Item 2 of Article 6 of the Enterprise Income Tax Law mean the incomes the enterprise has acquired through engaging in the construction and installation, repair and maintenance, transportation, warehouse lease, financial service and insurance, post and telecom, consulting and brokerage, culture and sports, scientific research, technical service, education and training, restaurant and hotel, agent services, hygiene and healthcare, community service, tourism, entertainment, processing and other labor services.
Article 16 The incomes from the property transfer as stated in Item 3 of Article 6 of the Enterprise Income Tax Law mean the incomes that are obtained by an enterprise through the transfer of its fixed assets, biologic assets, intangible assets, equity, creditor's right, or other property.
Article 17 The earning from equity investments like the income from dividend and bonus as stated in Item 4 of Article 6 of the Enterprise Income Tax Law mean the incomes which the enterprise has acquired through equity investment from the invested party.
The realization of earnings from the equity investments like the income from dividend and bonus shall be determined based on the date when the invested party has made its profit distribution plan unless otherwise specified by the competent finance and taxation departments under the State Council.
Article 18 The incomes from interests as stated in Item 5 of Article 6 of the Enterprise Income Tax Law mean the interests the enterprise has acquired through providing the fund not constituting the equity investment to the other party or due to other party's occupying the enterprise's fund, including the savings' interest, the loan interest, the bond interest, and the interest on arrears.
The realization of interest income shall be determined according to the date stipulated in the contract on which the debtors shall pay interests.
Article 19 The incomes from rentals as stated in Item 6 of Article 6 of the Enterprise Income Tax Law mean the incomes that the enterprise has acquired through providing the fixed assets, packaging, and the use right of other tangible assets.
The realization of incomes from rentals shall be determined according to the date stipulated in the contract on which when the lessee shall pay the rentals.
Article 20 The incomes from royalty fees as stated in Item 7 of Article 6 of the Enterprise Income Tax Law mean the incomes that the enterprise has acquired through granting the franchise of the patent right, non-patent technology, trademark, copyright, and other rights.
The realization of incomes from royalty fees shall be determined according to the date stipulated in the contract on which the franchisee shall pay the royalty fees.
Article 21 The incomes from donations as stated in Item 8 of Article 6 of the Enterprise Income Tax Law mean the currency assets or non-currency assets which have been voluntarily and freely given by other enterprise, organization, and individual person.
The recognition of incomes from donations shall be determined according to the date on which the donations are actually received.
Article 22 Other incomes as stated in Item 9 of Article 6 of the Enterprise Income Tax Law mean any incomes the enterprise has acquired except for the incomes specified in Items 1-8 of Article 6 of the Enterprise Income Tax Law, including the assets appreciation surplus, the deposit income due to not returning the packaging on maturity date, the payable due to incapability in payment, the receivable which has been treated as bad debt but collected again, the debt restructuring income, the subsidy, the penalty of breach income and exchange earnings.
Article 23 The realization of the incomes from the following production and business operations may be determined by stages:
1. In case of selling goods in installments, the realization of the income shall be determined according to the payment collection date stipulated in the contract; and
2. In case of engaging in assembly and manufacture of the large-size machinery equipment, ship and aircraft, or in construction, installation, and decoration project, or providing other labor service with the term lasting for over 12 months, the realization of the income shall be determined according to the completion progress and completed workload in the tax year.
Article 24 In case of acquiring the income based on the product distribution plan, the realization of such income shall be determined according to the date on which the enterprise has actually received the product as per the aforesaid product distribution plan, and the amount of such income shall be determined according to the product's fair value.
Article 25 In case of exchanging the non-currency assets, and using the goods, property and labor service as donation, payment of debt, sponsor, money-raising, advertising, sample, employee's benefit and profit distribution, it shall be deemed as selling goods, transferring property, or providing labor service unless otherwise prescribed by the competent finance and taxation departments under the State Council.
Article 26 The financial appropriation as stated in Item 1 of Article 7 of the Enterprise Income Tax Law means the funds which are included in the budget plans of the people's governments at all-levels and appropriated to the organizations like the institution and social organization unless otherwise prescribed by the competent finance and taxation departments under the State Council.
The administrative levying fees as stated in Item 2 of Article 7 of the Enterprise Income Tax Law mean the expenses which the enterprise will, after obtaining the approval in compliance with the procedures ordered by the State Council, during the process of implementing social public management, and providing specific public service to residents, legal persons, or other organization, collect from the special serviced objectives in accordance with the relevant provisions of the laws, administrative regulations or regional laws and regulations, and which shall be included in the budget management.
The government fund as stated in Item 2 of Article 7 of the Enterprise Income Tax Law means the special-purpose treasury fund which the enterprise act for the government to collect in accordance with the laws and the administrative regulations.
Other tax-free incomes specified by the State Council as stated in Item 3 of Article 7 of the Enterprise Income Tax Law mean the acquired treasury funds of enterprises which are specified by the competent finance and taxation departments under the State Council for the special-purposes.
Section 3 Deduction
Article 27 Relevant expenditure as stated in Article 8 of the Enterprise Income Tax Law means the expenditures in connection with acquiring the incomes.
......