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  Regulations Concerning the Income Tax.......

Regulations on Some Policy Issues Concerning the Income Tax for Enterprises

Cai Shui Zi [1994] No.009

I. Tax on the other units and organizations with operating income

I The social organizations and public institutions responsible for its own income and expenditure and practicing enterprise management shall pay income tax locally for their production and operating income and other income.

II The other social organizations and public institutions shall pay income tax as required for their production and operating income and other income.

II. Tax on affiliated enterprises

I Before distributing profit, the affiliated enterprises shall pay income tax locally for their production and operating income. The losses of affiliated enterprises shall be offset by them in accordance with relevant provisions.

II With respect to the after-tax profit distributed by an affiliated enterprise to its investor, if the investor's business income tax rate is lower than that of the affiliated enterprise, the income tax paid shall not be refunded; if the investor's business income tax rate is higher than that of the affiliated enterprise, the investor shall pay income tax for the distributed after-tax profit. The computing formulae of additional income tax are as follows:

1. Taxable income from the affiliated enterprise = profit distributed to the investor÷1-income tax rate of the affiliated enterprise

2. Income tax payable = taxable income from the affiliated enterprise × tax rate applicable to the investor

3. Tax deduction = taxable income from the affiliated enterprise × income tax rate of the affiliated enterprise

4. Additional income tax = income tax payable - tax deduction

III. Enterprises may adjust tax payment for the dividends and bonuses from investment by reference to the provisions on the affiliated enterprises.

IV. The income tax on the affiliated enterprises and joint-stock enterprises formed by central and local enterprises public institutions shall be imposed by central tax bureaus and their directly-controlled institutions. The income tax on the affiliated enterprises and joint-stock enterprises formed by local enterprises and public institutions shall be imposed by local tax bureaus.

V. Salary expenditure of enterprises

I With respect to the enterprises that link total payroll with economic benefits with approval of competent authorities, the salaries paid may be deducted from the taxable income if the growth rate of total payroll is lower than that of economic benefits and the growth rate of average payroll of employees is lower than that of the labor productivity.

II The salaries set aside from the retained profits by the catering service enterprises in accordance with state provisions may be deducted from the taxable income.

III The other enterprises not subject to the measures above shall comply with the measures for salaries subject to tax. The salaries paid within the standard for the taxable salaries may be deducted from tax according to the actual payment. The part in excess of the standard shall not be deducted from the taxable income. The maximum limit for monthly deduction of taxable salaries shall be RMB500 per head, with the specific deduction standards to be determined by the people's government of each province, autonomous region and municipality according to local industrial situations and filed with the Ministry of Finance. Several economically developed regions may be not more than 20% higher than the maximum limit when necessary, and shall report to the Ministry of Finance for approval. The Ministry of Finance will make appropriate adjustment to the taxable salary limit according to the consumer price index published by the National Bureau of Statistics, and each region may adjust its taxable salary standards accordingly.

VI. Depreciation of fixed assets

The depreciation life of fixed assets of enterprises shall comply with the provisions of financial systems by industry promulgated by the Ministry of Finance.

With respect to a small number of urban collective enterprises and township enterprises which need to reduce the depreciation life for special reasons, these enterprises may file an application to the tier-1 local tax bureaus of provinces, autonomous regions and municipalities through consultation with the financial departments bureaus)。 But the depreciation life shall not be lower than the life specified below:

I Housing and building: 20 years;

II Train, steamship, machinery and other production equipment: 10 years;

III Electronic equipment, other transportation tools other than train and steamship and the devices, tools and furniture relating to production and operation: 5 years.

VII. Tax payment methods

I The taxpayers of the enterprise group shall be the core enterprises and other member enterprises with independent economic accounting, and all taxpayers shall pay income tax locally.

II The income tax on some special industries and enterprises shall be handled according to the methods as below:

1. The income tax on the transportation enterprises including enterprises concurrently engaged in industry directly under the Ministry of Railways shall be paid collectively by the Ministry of Railways.

2. The income tax on the transportation enterprises excluding Air China, China Eastern Airlines and China Southern Airlines which pay income tax independently directly under the General Administration of Civil Aviation of China GACA shall be paid collectively by the GACA by the end of 1994.

3. The postal and communication enterprise including industrial enterprises, supply and marketing enterprises directly under the Ministry of Posts and Telecommunications shall be paid collectively by the ministry by the end of 1995.

VIII. Linkage of industrial policies

I With respect to the industries and enterprises adopting the profit contracting system or the system of handling over contracting income, no matter whether the contracting matures or not, these industries and enterprises shall pay income tax in accordance with the Interim Regulations on Income Tax for Enterprises and the implementing rules thereof.

II Foreign trade enterprises that have not substituted profit delivery by tax payment shall pay income tax in accordance with the Interim Regulations on Business Income Tax and the implementing rules thereof.

III Military enterprises shall pay income tax in accordance with the Interim Regulations on Business Income Tax and the implementing rules thereof.

IX. Two-tier preferential tax rates

The enterprises with annual taxable income no more than RMB30,000 shall pay income tax at a rate of 18% for the time being. The enterprises with annual taxable income of RMB30,000-RMB100,000 inclusive shall pay income tax at a rate of 27% for the time being.

X. Linkage of other related policies

I Enterprises are allowed to make up for the losses occurring after January 1, 1993 in accordance with the life specified in the new tax law. The losses occurring in the previous years shall be made up according to the original life.

II The administrative fee paid by enterprises to their competent authorities at the ratio approved by the fiscal and tax authorities is allowed to be deducted from taxable income during the Eighth Five-Year Plan period. The administrative fee saved by competent authorities may be carried forward to the next year by reducing the set-aside proportion or amount of the same year correspondingly.

III The membership fee paid by enterprises to the associations of commerce and industry is allowed to be deducted from the taxable income. The membership fee saved by the associations of commerce and industry may be carried forward to the next year by reducing the membership fee payable of the same year.

 

       Copyright:China Sincere & Success CPA Firm      Beijing ICP No.11023295