Supplementary Circular of the State Administration of Taxation on Measures for the Examination and Approval of Pre-Tax Deduction of Management Fees Extracted by the Head Office

Supplementary Circular of the State Administration of Taxation on Measures for the Examination and Approval of Pre-Tax Deduction of Management Fees Extracted by the Head Office

Guo Shui Han [1999] No.136

March 16, 1999

There are some problems arising since implementing the Rules for Examination and Approval of Pre-Tax Deduction of Management Fees Extracted by the Head Office (Guo Shui Fa [1996] No.177) issued by the State Administration of Taxation (the "Rule"), in order to improve administration on examination and approval of the management fees extracted by the head office, the circular on relevant matters is hereby as follows:

I. Scope for deducting management fees extracted by the head office
It is stipulated in the Rule that general institutions which are qualified legal persons providing integrated management for their branches and subsidiaries and do not have a fixed source of income may charge management fee on such branches and subsidiaries. This provision shall interpret the following:
1. General institutions shall be those which are qualified legal persons and have made tax registration.
2. General institutions shall be those which provide integrated management for their branches and subsidiaries in aspects of human resource, finance, capital, planning, investment and business decisions.
3. General institutions shall be those which do not have a fixed source of income or regular income and those which have such incomes but the amount is insufficient to cover the management costs.
4.
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