Rules for Deducting Commission Expenses During Tax Filing in China Clarified

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Apr. 15 – The State Administration of Taxation and the Ministry of Finance recently issued a circular clarifying the rules for deducting commission expenses during enterprise income tax filing.

The circular, Caishui [2009] No. 29, was issued March 19 and sets a deduction ceiling at 15 percent of the prescribed premium income for property insurance companies and 10 percent of the income for life insurance companies. The amount of commission charges that can be deducted by general enterprises cannot exceed 5 percent of the contracted amount.

The commission must be supported by a relevant contract or agreement documentation signed by a qualified agency, company or individual.

Except for payments to individuals or commissions expenses for issuance of equity security, cash payments to commission agents are non-deductible (payments need to be made via non-cash channels).

For tax inquiries or more information, please contact tax@dezshira.com or visit www.dezshria.com.