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the State Administration of Taxation
Official Reply of the State Administration of Taxation on the Issue of Calculation and Drawing of Provision for Bad Debts by Foreign-funded
Enterprises Engaging in the Business of Providing Guaranty for Loans
Guo Shui Han [2005] No. 850
Jiangsu Provincial Bureau of State Taxation:
Your Bureau’s “Request for Instructions on the Relevant Taxation Issues Concerning Foreign-funded Enterprises Engaging in the Business
of Providing Guaranty for Loans” (Su Guo Shui Fa [2005] No. 106 ) has been received. After deliberation, an official reply is hereby
given as follows:
A foreign-funded enterprise engaging in the business of providing guaranty for loans may, as the situation requires, comply with Paragraph
1 of Article 25 of the “Detailed Rules for the Implementation of the Law of People’s Republic of China on Income Taxes for Foreign-Funded
Enterprises and Foreign Enterprises”, to calculate and draw the provision for bad debts year by year on the premise that the year-end
balance of the provision for bad debts shall not exceed 3% of the year-end balance of the loans actually granted by the bank and
guaranteed by the said enterprise which are not guaranteed by any mortgage or pledge, and the provision for bad debts may be deducted
from the taxable income of the present year.
State Administration of Taxation
September 2, 2005
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