Enterprise Income Tax Law of the People's Republic of China (2018 Amendment)

Enterprise Income Tax Law of the People's Republic of China (2018 Amendment)

(Adopted at the 5th Session of the 10th National People's Congress of the People's Republic of China on March 16, 2007, amended for the first time in accordance with the Decision of the Standing Committee of the National People's Congress on Amending the Enterprise Income Tax Law of the People's Republic of China at the 26th session of the Standing Committee of the Twelfth National People's Congress of the People's Republic of China on February 24, 2017; and amended for the second time in accordance with the Decision of the Standing Committee of the National People's Congress to Amend Four Laws Including the Electric Power Law of the People's Republic of China on December 29, 2018)
Contents
Chapter I General Provisions
Chapter II Taxable Amount of Income
Chapter III Amount of Payable Taxes
Chapter IV Preferential Tax Treatments
Chapter V Withholding by Sources
Chapter VI Special Adjustments to Tax Payments
Chapter VII Administration of Tax Collection
Chapter VIII Supplementary Provisions

Chapter I General Provisions

Article 1 Within the territory of the People's Republic of China, the enterprises and other organizations that have incomes (hereinafter referred to as the enterprises) shall be payers of the enterprise income tax and shall pay their enterprise income taxes in accordance with this Law.
This Law does not apply to the sole individual proprietorship enterprises and partnership enterprises.

Article 2 Enterprises are classified into resident and non-resident enterprises.
The term "resident enterprise" as mentioned in this Law refers to an enterprise that is established inside China, or which is established under the law of a foreign country (region) but whose actual office of management is inside China.
The term "non-resident enterprise" as mentioned in this Law refers to an enterprise established under the law of a foreign country (region) , whose actual institution of management is not inside China but which has offices or establishments inside China; or which does not have any offices or establishments inside China but has incomes sourced in China.

Article 3 A resident enterprise shall pay the enterprise income tax on its incomes derived from both inside and outside China.
For a non-resident enterprise having offices or establishments inside China, it shall pay enterprise income tax on its incomes derived from China as well as on incomes that it earns outside China but which has real connection with the said offices or establishments.
For a non-resident enterprise having no office or establishment inside China, or for a non-resident enterprise whose incomes have no actual connection to its institution or establishment inside China, it shall pay enterprise income tax on the incomes derived from China.

Article 4 The enterprise income tax rate shall be 25%.
The tax rate that applies to a non-resident enterprise's incomes as mentioned in paragraph 3, Article 3 of this Law shall be 20%.

Chapter II Taxable Amount of Income

Article 5 The balance after deducting the tax-free incomes, tax-exempt incomes, all deduction items as well as the permitted remedies for losses of the previous year(s) from an enterprise's total amount of incomes of each tax year shall be the taxable amount of incomes.

Article 6 An enterprise's monetary and non-monetary incomes from various sources shall be the total amount of incomes, including:
(1) income from the sale of goods;
(2) income from the provision of labor services;
(3) income from the transaction of property;
(4) dividend, bonus and other equity investment proceeds;
(5) income from interests;
(6 ) income from rentals;
(7) income from royalties;
(8) income from accepted donations; and
(9) other incomes.

Article 7 The following incomes included in the total amount of incomes shall be tax-free incomes:
(1) The appropriations from the treasury;
(2) The administrative fees and the governmental funds that are charged according to the law and fall under the treasury administration; and
(3) Other tax-free incomes as prescribed by the State Council.

Article 8 The reasonable disbursements that are actually incurred and in which have actual connection with the business operations of an enterprise, including the costs, expenses, taxes, losses, etc., may be deducted in the calculation of the taxable amount of incomes.
Article 9 Of an enterprise's charitable donation expenditures, the part which is not more than 12% of its total annual profits shall be deductible in the calculation of its taxable income; and the excess over 12% of its total annual profits may be carried forward for three years in the calculation of its taxable income.

Article 10 None of the following disbursements may be deducted in the calculation of the taxable amount of incomes:
(1) Dividend, bonus and other equity investment proceeds paid to the investors;
(2) Payment for enterprise income tax;
(3) Late fee for taxes;
(4) Pecuniary punishment, fines, and losses of properties confiscated;
(5) Disbursements for donations other than those provided for in Article 9;
(6) Sponsorship disbursements;
(7) Unverified reserve disbursements;
(8) Other disbursements that have nothing to do with the obtainment of revenues;

Article 11 When calculating the taxable amount of incomes, an enterprise is allowed to deduct the depreciations of fixed assets calculated under the relevant provisions.
No depreciation may be calculated for any of the following fixed assets:
(1) The fixed assets that have not yet been put into use, excluding houses and buildings;
(2) The fixed assets rented in by way of commercial lease;
(3) The fixed assets rented out by way of finance leasing;
(4) The fixed assets for which depreciation has been allocated in full amount but which remain in use;
(5) The fixed assets that have nothing to do with the business operations;
(6) The land that is separately appraised and entered into account as an item of fixed asset; and
(7) Other fixed assets for which no depreciation may be calculated.

Article 12 When calculating the taxable amount of incomes, an enterprise is allowed to deduct the amortized expenses of intangible assets calculated according to the relevant provisions.
No amortized expense may be calculated for the following intangible assets:
(1) The intangible assets, for which the self-development expenses have been deducted in the calculation of the taxable amount of incomes;
(2) The self-created business reputation;
(3) The intangible assets that have nothing to do with the business operations; and
(4) Other intangible assets for which no amortized expense may be calculated.

Article 13 The following expenses incurred by an enterprise shall, in the calculation of the taxable amount of incomes, be treated as long-term deferred expenses. Those amortized under the relevant provisions are allowed to be deducted:
(1) The expenses for the rebuilding of a fixed asset, for which depreciation has been prepared in full amount;
(2) The expenses for the rebuilding of a rented fixed asset;
(3) The expenses for the heavy repair of a fixed asset; and
(4) Other expenses that shall be treated as long-term deferred expenses.

Article 14 During the period of external investment, an enterprise shall not deduct the costs of the investment assets when it calculates the taxable amount of incomes.

Article 15 Where an enterprise uses or sells its inventories, it is allowed to deduct the costs of the inventories calculated according to the relevant provisions in the calculation of the taxable amount of incomes.

Article 16 Where an enterprise transfers an asset, it is allowed to deduct the net value of the asset in the calculation of the taxable amount of incomes.

Article 17 When an enterprise calculates its enterprise income taxes on a consolidated basis, it shall not offset the losses of its overseas business institutions against the profits of its domestic business institutions.

Article 18 The losses incurred by an enterprise during a tax year may be carried forward and subtracted from the incomes during subsequent years for a maximum carry-forward period of 5 years.

Article 19 Where a non-......