China Issues Detailed Rules on Deductions for Asset Losses -- New Incentives for Technology Companies

Excerpt from Practical China Tax and Finance Strategies by Yongjun Peter Ni, Linda Ng, Jiang Bian and Angel Wu (White Case, China)



Detailed rules on deduction of asset losses issued under the new Enterprise Income Tax Law, the taxable income is defined as an enterprise’s total income minus the sum of non-taxable income, tax-exempt income, deductions and net operating loss carryovers.



Deductions include costs, expenses, taxes, losses and other expenses. In order to provide detailed guidance on loss deduction, the Ministry of Finance and the State Administration of Taxation (“SAT”) have jointly issued circular Caishui [2009] No 57, the Notice regarding Pre-tax Deduction of Asset Losses, followed by circular Guoshuifa [2009] No 88, the Administrative Measures of Pre-tax Deduction of Asset Losses. The latter lays out the detailed implementation rules on deduction of asset losses. Both circulars take retroactive effect back to January 1, 2008. Under the two circulars, asset losses that can be deducted are divided into three categories, based on the nature of the asset.



Read More