Tax Treatments for China FIE Charity Donations

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May 16 – Representative offices in China are not advised to make charitable donations from the China bank accounts as business taxes will be levied. Foreign-invested enterprises are able to donate up to 12 percent of their profits tax free.

Dezan Shira & Associates advises that a representative office make a donation on behalf of the head office, i.e. the headquarters located outside China, and the money transferred from the parent company and not the RO.

Upon receiving receipts from the relevant charity, the donor is suggested to be identified as the parent company, rather than the RO in China, to avoid business tax being levied on the donation. The Beijing tax bureau states that is important both the donation and the receipt show the amount was sent from overseas and that it does not go through the RO’s books.

For other FIEs in China (WFOEs, JVs), the following stipulations apply:

Under current Chinese tax regulations, the allowable deduction of donation for tax purpose is no more than 12 percent of the total annual profit according to calculating the FIE taxable income.

In addition, some tax preference policies are currently being discussed at the State Administration of Taxation to offer further incentives to tax payers when making donations for such disasters. We will keep our readers posted on this new tax preference policy once it is stipulated.

Readers are recommended to check with their local tax bureau or contact the regional Dezan Shira & Associates office for further advice on tax treatments for charitable purposes. The firm does not levy fees for such assistance.

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