Notice of the State Administration of Taxation on Printing and Issuing the Measures for the Administration of Tax Deduction or Exemption
(for Trial Implementation)
Guo Shui Fa [2005] No. 129
The state and local taxation bureaus of all provinces, autonomous regions, municipalities directly under the Central Government and
Yangzhou Taxation Institute:
With a view to regulating and intensifying the administration of tax deduction or exemption, the State Administration of Taxation
has formulated the Measures for the Administration of Tax Deduction or Exemption (for Trial Implementation) and hereby prints and
distributes it to you for implementation.
Annex: Measures for the Administration of Tax Deduction or Exemption (for Trial Implementation)
State Administration of Taxation
August 3, 2005
Measures for the Administration of Tax Deduction or Exemption (for Trial Implementation)
Chapter I General Provisions
Article 1
With a view to regulating and intensifying the administration of tax deduction and exemption, the present Measures are formulated
in accordance with the Law of the People’s Republic of China on Tax Collection and Administration (hereinafter referred to as the
Law on Tax Collection and Administration) and the Detailed Rules for Implementation thereof and the provisions of the relevant laws,
regulations and rules on tax deduction or exemption.
Article 2
The term “tax deduction or exemption” as mentioned in the present Measures refers to the treatment of tax deduction or tax exemption
that is granted to a taxpayer under the laws and regulations on tax collection and the relevant provisions of the state on tax collection
(hereinafter referred to as the provisions of tax laws). The term “tax deduction” refers to the deduction of some amount of tax from
the tax payable; while “tax exemption” refers to the exemption of tax under a special tax category or item.
Article 3
The tax authorities at various levels shall, in accordance with the principles of legality, openness, impartiality, high-efficiency
and convenience, standardize the administration of tax deduction and exemption.
Article 4
The tax deduction or exemption are classified into the tax deduction or exemption by way of approval and the tax deduction or exemption
by way of archival filing. The term “tax deduction or exemption by way of approval” refers to the item of tax deduction or exemption
that shall be subject to the examination and approval of the tax authority. The term tax deduction or exemption by way of archival
filing” refers to the item of tax deduction or exemption for which the formalities of examination and approval have been eliminated
and which is not subject to the examination and approval of the tax authority.
Article 5
A taxpayer who enjoys the tax deduction or exemption by way of approval shall submit relevant materials and file an application for
approval. The tax deduction or exemption thereof is implemented upon the approval and verification of the tax authority that has
the power of examination and approval (hereinafter referred to as the competent tax authority), as is prescribed in the present Measures.
Where a taxpayer fails to file an application or fails to obtain the approval and verification of the competent tax authority, he
may not enjoy any tax deduction or exemption.
A taxpayer that requests for enjoying the tax deduction or exemption by way of archival filing shall file an application for archival
filing , the relevant tax deduction or exemption shall be implemented as of the date when the tax authority has handled the formalities
of registration and record keeping. A taxpayer that fails to go through the archival filing in accordance with the relevant provisions
may not enjoy any tax deduction or exemption.
Article 6
For a taxpayer that concurrently engages in activities under the item of tax deduction or exemption as well as item of non-tax-deduction
or exemption, the tax amount thereof shall be verified and calculated separately, that is, the tax-computation base for those activities
under the item of tax deduction or exemption as well as the amounts to be deducted or exempted shall be separately calculated. If
they cannot be verified and calculated separately, no tax exemption or reduction is allowed. If they cannot be verified and calculated
in a clear way, the tax authority shall verify and determine them in a reasonable way.
Article 7
A taxpayer may enjoy the treatment of tax deduction or exemption under the law. For anyone who fails to enjoy the said treatment,
which result in his overpayment of taxes, if there is no definite provision that the refund of the overpaid taxes shall be subject
to the examination and approval of the tax authority or there is no prescribed time limit for filing an application for such refund,
the taxpayer may, within the time limit as prescribed in Article 51 of the Law on Tax Collection and Administration, file an application
for refunding the overpaid taxes, but no interest calculated at the bank deposit rates for the corresponding period of time will
be available.
Article 8
The authority in charge of the examination and approval of tax deduction or exemption shall be provided for by laws, regulations and
rules on tax collection. Where the tax deduction or exemption is be subject to the examination and approval of the State Administration
of Taxation, it shall be reported to the State Administration of Taxation through the tax authority of the province, autonomous region,
municipality directly under the Central Government or the city under separate state planning. Where the tax deduction or exemption
is subject to the examination and approval of the tax authority at or below the provincial level, it shall be subject to the examination
and approval of the tax authority at the provincial level, which shall determine the power of examination and approval,, and as is
the general principle, it is subject to the examination and approval of the tax authority of the county (district) where the taxpayer
is located. For any item with a large sum of tax to be deducted or exempted or the condition is complicated, the tax authority of
the province, autonomous region, municipality directly under the Central Government or the city under separate state planning shall,
pursuant to the principles of efficiency and convenience, supervision and responsibility, define the power of examination and approval
in a proper manner.
The tax authorities at various levels shall carry out the examination and approval for tax deduction or exemption in accordance with
the prescribed power and procedures and are not allowed to carry out any examination and approval by exceeding their power or violating
the relevant provisions.
Chapter II Application, Report, Examination and Approval, and Implementation of Tax Deduction or Exemption
Article 9
A taxpayer who applies for tax deduction or exemption by way of approval shall, within the period as prescribed by policies for tax
deduction or exemption, file a written application with the administrative tax authority and report the following materials:
(1)
An application report for tax deduction or exemption, clearly indicating the reason, basis, scope, period, quantity, amount, and so
on;
(2)
The financial statements and a tax return;
(3)
The certification materials as issued by the relevant departments; and
(4)
Other material as required by the tax authority.
The materials reported by a taxpayer shall be authentic, accurate and complete. The tax authority may not require a taxpayer to submit
any technical material or any other material that is irrelevant to the tax deduction or exemption item it applies for.
Article 10
A taxpayer may apply to the administrative tax authority for tax deduction or exemption or may apply to the competent tax authority
directly.
For any application that is accepted by the administrative tax authority where the relevant taxpayer is located and shall be subject
to the examination and approval of the tax authority at a higher level, the administrative tax authority shall, within 10 workdays
as of acceptance of the application, directly report it to the tax authority at a higher level that has the power of examination
and approval.
Article 11
The tax authority shall handle the applications for tax deduction or exemption in light of the following circumstances:
(1)
If the tax deduction or exemption item as applied for is not subject to the examination of the tax authority before implementation,
the taxpayer shall be informed of the non-acceptance in a timely manner;
(2)
If the application material concerning tax deduction or exemption is not detailed enough or has any mistake, the taxpayer shall be
informed of it and allowed to correct it.
(3)
If the application material concerning tax deduction or exemption is incomplete or out of line with the statutory form, the taxpayer
shall be informed of all the content that needs to be supplemented and corrected in a one-off manner within 5 workdays; and
(4)
If the application material concerning tax deduction or exemption is complete and complies with the legal form, or the taxpayer has
submitted all the tax deduction or exemption materials as is required to be supplemented or corrected by the tax authority, the application
thereof shall be accepted.
Article 12
When the tax authority accepts or refuses to accept an application for tax deduction or exemption, it shall issue a written certification
affixed with the special seal thereof and indicated with the date as well.
Article 13
The examination and approval for tax deduction or exemption is an examination on the situation whether the materials provided by the
relevant taxpayer is pertinent to the statutory requirements of tax deduction or exemption. It does not change the responsibility
of a taxpayer to file tax returns in a faithful manner.
Where it is necessary for the tax authority to carry out an on-the-spot verification of the contents of the application materials,
it shall assign 2 or more working staff to conduct the on-the-spot verification according to the prescribed procedures and put the
verification on record. Where it is both heavy and time-consuming for a superior tax authority to carry out on-the-spot verification
regarding tax deduction or exemption, it may entrust the tax authority at the county level where the enterprise is located to conduct
the verification.
Article 14
Where the period for tax deduction or exemption exceeds 1 tax year, the examination and approval shall be carried out in a one-off
way.
Where the condition for a taxpayer to enjoy the tax deduction or exemption changes, it shall be reported to the tax authority within
15 workdays as of the change, and the tax deduction or exemption shall be terminated after the examination of the tax authority.
Article 15
The tax authority that has the power to examine and approve an application of a taxpayer for tax deduction or exemption shall complete
the examination and approval within the time limit provided for as follows in a timely manner and make a decision thereon:
The tax authority at the county or district level in charge of the examination and approval of tax deduction or exemption shall, within
20 workdays, make a decision on the examination and approval. The tax authority at the prefectural or municipal level in charge of
the examination and approval of tax deduction or exemption shall, within 30 workdays, make a decision on the examination and approval.
The tax authority at the provincial level in charge of the examination and approval of tax deduction or exemption shall, within 60
workdays, make a decision on the examination and approval. In case an authority fails to make the relevant decision within the prescribed
time limit may, upon the approval of the principal of the tax authority at the same level, the period for examination and approval
may be extended for another 10 workdays and the taxpayer concerned shall be informed of the reason for the extension.
Article 16
Where an application for tax deduction or exemption satisfies the statutory requirements and standards, the competent tax authority
shall, within the prescribed time limit, make a written decision on granting the approval. In the case of disapproval for the tax
deduction or exemption, an explanation shall be given and the taxpayer concerned shall be informed of the right to apply for administrative
reconsideration or file an administrative lawsuit according to law.
Article 17
Where the tax authority makes a decision on examination and approval of tax deduction or exemption, it shall, within 10 workdays as
of the day when the decision is made, serve the taxpayer with the written decision of examination and approval of tax deduction and
exemption.
Article 18
Prior to the service of the reply for tax deduction or exemption, the relevant taxpayer shall file tax returns and pay taxes in accordance
with the relevant provisions.
Article 19
Prior to the implementation of the tax deduction or exemption by way of archival filing, a taxpayer shall file the following materials
with the administrative tax authority for record:
(1)
The implementation of the policies for tax deduction or exemption; and
(2)
Relevant materials as required by the administrative tax authority.
The administrative tax authority shall, within 7 workdays as of the date of filing of the taxpayers application, complete the work
of registration and archival filing and inform the taxpayer to implement.
Chapter III Administration and Supervision of Tax Deduction and Exemption
Article 20
The tax deduction or exemption enjoyed by a taxpayer shall be incorporated into the normal tax return to apply for the tax deduction
or exemption.
Upon the expiration of the period for tax deduction or exemption, a taxpayer shall file relevant tax returns and pay taxes.
The tax authority and tax administrators shall strengthen the administration of and supervision over tax deduction and exemption.
Article 21
The tax authority shall combine the inspection of tax return, law enforcement and other specific inspections with the through investigation
and rectification on the of tax deduction or exemption items on a periodical basis every year to intensify its supervision and examination.
The major contents shall include:
(1)
Whether or not a taxpayer satisfies the qualifications for tax deduction or exemption; whether or not the taxpayer cheats for tax
deduction or exemption by means of concealing the relevant information or providing any false material;
(2)
If the condition for a taxpayer to enjoy tax deduction or exemption changes, whether or not he has gone through the formalities for
tax deduction or exemption in light of the change after the tax authority has made a second examination;
(3)
If the amount of tax deduction or exemption is granted for a special purpose, whether or not the taxpayer has used the tax deduction
or exemption for the prescribed purpose; where a time period is prescribed for tax deduction or exemption, whether or not the taxpayer
have resumed the tax payment since the expiration;
(4)
Whether or not a taxpayer unlawfully has enjoyed any tax deduction or exemption without the examination and approval of the tax authority;
or
(5)
Whether or not any tax deduction or exemption that a taxpayer has enjoyed fails to be reported.
Article 22
A responsibility system of “he who carries out the examination and approval shall take the responsibility” shall be adopted for the
examination and approval of tax deduction or exemption. The tax authorities at various levels shall incorporate the examination and
approval of tax deduction or exemption into the post responsibility assessment system and establish a system of investigating into
the responsibility of administrative law enforcement of tax collection.
(1)
Establishing and improving the system of examination and approval, track-down and feedback. The tax authorities at various levels
shall carry out the track-down and feedback on the examination and approval work on a periodical basis and duly improve the working
mechanism of examination and approval.
(2)
Establishing an appraisal and examination system for examination and approval files. The examination and approval authority at various
levels shall establish all categories of files for examination and approval and keep them in a proper manner. The superior tax authority
shall assess and examine the archived materials on a periodical basis.
(3)
Establishing a hierarchical supervision system. The superior tax authority shall establish a frequent supervision system so as to
strengthen the supervision of the examination and approval work of the tax authority at lower levels, including whether or not the
tax deduction or exemption has been examined and approved according to the capacity, requirements and the time limit as prescribed
in the present Measures.
Article 23
The tax authority shall, according to the time and procedures as prescribed in the present Measures and pursuant to the principles
of fairness, transparency, honesty, high efficiency and convenience, accept the application that is filed by a taxpayer for tax deduction
or exemption and carry out the relevant examination and approval in a timely manner. Where the tax authority fails to accept or carry
out the relevant examination and approval in a timely manner without any objective causes, or a mistake is resulted in the examination
and approval and verification it carries out due to its failure to comply with the prescribed procedures, it shall be subject to
relevant liabilities in accordance with the relevant provisions of the Law on Tax Collection and Administration and the tax law enforcement
responsibility system.
Article 24
Where the business situation of a taxpayer does not meet the requirements of tax deduction or exemption, or a taxpayer obtains the
treatment of tax deduction or exemption by fraudulent means, or where there is a change in the condition for enjoying the tax deduction
or exemption and the taxpayer concerned fails to report it to the tax authority, or a taxpayer deducts or exempts his taxes without
applying for approval in accordance with the procedures as prescribed by the present Measures, the tax authority shall deal with
it in accordance with the relevant provisions of the Law on Tax Collection and Administration.
In case an enterprise fails to pay taxes or fails to underpay tax as a result of a mistake as incurred by the tax authority in the
process of examination and approval or verification, it shall be dealt with in accordance with Article 52 of the Law on Tax Collection
and Administration.
Any tax authority that exceeds its power to approve any tax deduction or exemption shall be dealt with in accordance with the provisions
of Article 84 of the Law on Tax Collection and Administration.
Article 25
The tax authority shall, in accordance with the principle of substance over form”, carry out a post supervision and examination
over the business situation of enterprises. In the process of examination, where finding any mistake in an appraisal as committed
by the relevant department of professional or economic appraisal, it shall coordinate and communicate with the relevant departments
for correction, disqualify the relevant taxpayer for preferential treatments in a timely manner, and urge to take legal actions against
the relevant persons responsible. In case a relevant department unlawfully provides certification documents to a taxpayer resulting
in the non-payment or underpayment of tax payable, it shall be dealt with in accordance with the provisions of Article 93 of the
Detailed Rules for Implementing the Law of the People’s Republic of China on Tax Collection and Administration.
Chapter IV Archival Filing of Tax Deduction or Exemption
Article 26
The administrative tax authority shall establish a management account of tax deduction or exemption for taxpayers, which registers
the approval time, item, maximum years, amount of tax deduction or exemption in details and establish a dynamic administration and
supervision mechanism of tax deduction or exemption.
Article 27
For the annual tax deduction or exemption of a newly-established enterprise that has suffered a serious natural disasters such as
hurricane, fire, flood or earthquake, etc., or that is located in former revolutionary base areas, areas inhabited by minority ethnic
groups, remote or border areas, or poverty-stricken areas or in the western regions, whose deducted or exempted share of tax belonging
to the central revenue reaches 1 million Yuan or more, it is no longer subject to the examination and approval of the State Administration
of Taxation; instead, the authority of examination and approval shall be specified by the tax authority at the provincial level.
The tax authority in charge of examination and approval shall report the information on tax deduction and exemption by taxpayer (including
the item, base and amount of tax deduction or exemption) to the tax authority at the provincial level for archival filing on the
basis of households.
Article 28
The tax authorities of all provinces, autonomous regions, municipalities directly under the Central Government and the cities under
separate state planning shall, prior to the end of June each year, report in writing the information on tax deduction and exemption
and submit a summary report of the previous year to the State Administration of Taxation. The fulfillment of tax deduction or exemption
items that are subject to the examination and approval of the State Administration of Taxation shall be reported in writing by the
tax authorities at the provincial level.
The summary report on tax deduction or exemption shall include the following contents: the basic information and analysis of tax deduction
or exemption; the implementation of the policies for tax deduction or exemption as well as the existing problems; the experiences
in the administration of tax deduction and exemption, and relevant suggestions.
Article 29
The measures for the accounting and statistics of tax deduction or exemption shall be separately formulated and distributed.
Chapter V Supplementary Provisions
Article 30
The present Measures shall go into effect as of October 1, 2005. In case of any discrepancy between previous provisions and the present
Measures, the present Measures shall prevail.
Article 31
The state and local taxation bureaus of all provinces, autonomous regions, municipalities directly under the Central Government and
the cities under separate state planning may formulate specific implementation plans in accordance with the present Measures.
Annex:Examination and Approval Requirements of the Deduction or Exemption of Enterprise Income Tax
I.
Preferential Policies for the Income Tax of Software Development Enterprises or Integrated Circuit Design Enterprises:
1.
A software development enterprise shall concurrently satisfy the following requirements:
(1)
Having obtained the Ascertainment Certificate of Software Enterprises as issued by the administrative department of information industry
at the provincial level;
(2)
Undertaking the development and production of computer software, system integration, application services and other corresponding
technical services as main business, with the exception of those enterprises that only engage in software trade who may not enjoy
the preferential tax policy;
(3)
Having more than one software product that are developed by the enterprise or whose intellectual property right is owned by the enterprise,
or providing such services as the system integration of computer information that has passed the qualification grade accreditation;
(4)
Having the technical equipment and business place that are necessary for software development and relevant technical services.
(5)
The technical personnel that engage in the development of software products and technical services occupying no less than 50 % of
the total number of its employees.
(6)
The funds for the research and development of software techniques and products constituting more than 8% of its income as generated
from software. and
(7)
The annual sales income from software constituting more than 35% of its total annual income. In particular, the sales income from
self-produced software accounts for more than 50 % of its total sales income from software.
2.
An integrated circuit design enterprise shall concurrently satisfy the following requirements:
(1)
Having acquired the relevant certificates and certification documents as issued by an accreditation institution under the entrustment
of the Ministry of Information Industry;
(2)
Undertaking the integrated circuit design as its main business;
(3)
Having the basic conditions, such as the business place, software and hardware facilities and personnel and so on, that comply with
the design and development of integrated circuits, having standardized management on working procedures and integrated circuit design
and having the means and capability to guarantee the quality of its design products; and
(4)
The income from self-designed integrated circuit products and the income from entrusted designing products taking up more than 30%
of its total annual income.
3.
The key software enterprise under the state planning shall be the enterprise that is included in the list of key software enterprises
, which are jointly determined by the National Reform and Development Commission, the Ministry of Commerce, the Ministry of Information
Industry, and the State Administration of Taxation, and shall have obtained the Certificate of Key Software Enterprises under the
state planning as accredited by the China Software Industry Association.
4.
The term “newly established software enterprise or integrated circuit enterprise” refers to an enterprise that is newly established
after July 1, 2000. The term “profit-making year” refers to the first tax year, in which an enterprise is profitable since the start
of production and business operations. Where an enterprise runs at a loss at the initial stage of its establishment, it may carry
forward the losses to subsequent years in accordance with the provisions of tax law and the year when all the losses have been made
up (the enterprise may exceed the prescribed makeup year) and there are still taxable incomes shall be deemed as the first profit-making
year. The period for the income tax deduction or exemption shall be calculated as of the profit-making year in a consecutive manner
and may not be extended due to any loss that occurs in the course.
II.
Preferential Policies for the Income Tax of Enterprises that Employ Laid-off Workers
1.
Scope of Laid-off Workers
Specifically including:
1. laid-off workers of state-owned enterprises;
2. unemployed workers of state-owned enterprises;
3. workers for whom other positions shall be found for due to bankruptcy of a state-owned enterprise;
4. other unemployed persons in the urban or suburban areas that receive the minimum living allowance and have been out of work for
1 year or more.
A laid-off worker an enterprise employs shall hold the Preferential Re-employment Certificate as issued by the administrative department
of labor and securities.
2.
Specific Requirements for Commercial Enterprises
(1)
The term “commercial enterprise” refers to an enterprise that is involved in the retail industry (excluding the retail of tobacco
products), or in the accommodation and catering industry (excluding tourist hotel). The term “commercial retail enterprise” refers
to an retail enterprise that has its business place and counters for the sale of products and that doesn’t produce any product by
itself and directly supplies product to ultimate consumers, including department stores, supermarkets and retail stores engaging
in the sale of various commodities, etc.
(2)
A newly established commercial enterprise shall have obtained a Certification of Reemployment of Laid-off Workers By A Newly-established
Commercial Enterprise as approved and issued by the administrative department of labor and social security. An established commercial
enterprise shall have obtained the Certification of Reemployment of Laid-off Workers By An Established Commercial Enterprise as approved
and issued by the administrative department of labor and social security.
(3)
The number of laid-off personnel as employed in the current year shall comply with the required proportion.
(4)
The enterprise shall establish a stable labor relationship with laid-off workers by concluding labor contracts or agreements for a
term of 1 year or more and purchase endowment insurance for the resettled laid-off workers.
3.
Specific Requirements for Service Enterprises
(1)
The term “service enterprise” refers to an enterprise that engages in the business operations as prescribed in the tax items of “service
industry” under business tax and excludes such service enterprises that engage in advertising, sauna bath, massage, Internet bar,
or oxygen bar.
(2)
A newly established service enterprise shall have obtained a Certification of Reemployment of Laid-off Personnel By A Newly-established
Service Enterprise as approved and issued by the administrative department of labor and social security. An established service enterprise
shall have obtained the Certification of Reemployment of Laid-off Personnel By An Established Service Enterprise as approved and
issued by the department of labor and social security.
(3)
For other requirements, it shall be implemented by applying mutatis mutandis the requirements for commercial enterprises .
4.
An Economic Entity which is Established by a Medium and Large-sized State-owned Enterprise through Segmentation of the Primary Business
from the Sideline Ones and Restructuring of the Sideline Ones and Resettlement of Redundant Personnel
(1)
An economic entity shall satisfy the following requirements:
(a) Using non-core assets and idle assets of the former enterprise as well as the efficient assets of a policy-related bankrupt enterprise
(hereinafter referred to as the “three-type assets”);
(b) Conducting independent accounting, having defined property rights clearly and realizing the pluralistic ownership of property
rights;
(c) Employing more than 30% of redundant workers of the former enterprise; and
(d) Making amendment to labor contracts or concluding new labor contracts with the resettled personnel.
In particular, the department of public finance or the administrative department of stat-owned assets as authorized by the department
of public finance
