Corporate Income Tax Treatments for Asset Losses Clarified
Jan. 29 – The State Administration of Taxation clarified corporate income tax treatment of asset losses not deducted in the year incurred.
Circular Guoshuihan  No. 772, issued by the SAT on December 31, 2009, further clarifies that for any asset losses, the principle set in Circular Guoshuihan  No. 88 apply regardless of whether the losses were incurred before or after 2008.
Asset losses should be recognized in line with the conditions set in the prevailing tax laws of the year when losses were incurred. That means that asset losses incurred by foreign-invested enterprises before January 1, 2008 fall under the old foreign enterprise income tax law.
Enterprises that overpaid CIT in previous years for asset losses not claimed are allowed to have this credited against CIT payments in the year when the losses were recognized and approved. Excess credit may be carried forward and no time limit is specified in circular for claiming this credit.
Where losses are incurred as a result of retroactive adjustments of asset losses, companies will be able to adjust tax losses for the year when asset losses were actually incurred and calculate the overpaid CIT based on the five-year loss carry forward rule in the CIT law.
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