Beijing United Foundation for China’s Health Became Eligible for Pre-tax Deductions for Philanthropic Donations in 2019
In May 2020, Beijing Municipal Bureau of Finance, Beijing Municipal Tax Service of State Taxation Administration and Beijing Municipal Bureau of Civil Affairs jointly issued announced (Document No. 848 [2020] Beijing Finance and Tax) that Beijing United Foundation for China’s Health (Beijing UFCH) will be granted the qualification for the pre-tax deduction for philanthropic donations in 2019. Enterprises and individuals that donate to Beijing UFCH and support such projects as “Healthcare for All”, “China Children’s Medical Care Program”, “Wheels for Life” and “Capacity Building Program” can enjoy the preferential policy of tax deduction of income tax.
What is pre-tax deduction? How to deduct?
Stipulation of the Charity Law
The Charity Law of the People’s Republic of China, which came into effect on September 1st, 2016, stipulates that:
Natural persons, legal persons and other organizations that donate property for charitable activities shall enjoy tax incentives according to law. Where an enterprise’s charitable donation expenditure exceeds the amount that is allowed to be deducted in the current year when calculating the taxable income amount of the enterprise income tax as prescribed by law, it is allowed to deduct the amount when calculating the taxable income amount within 3 years after the carryforward.
Individual donations
According to Article 6 of the Individual Income Tax Law of the People’s Republic of China (amended in 2018):
Individuals who donate their income to philanthropic and charitable undertakings such as education, poverty alleviation and poverty relief may deduct the portion of their taxable income that does not exceed 30% of the taxable income declared by taxpayers. Where the State Council stipulates that donations to philanthropic charities shall be deducted in full amount before tax, such provisions shall prevail.
According to Article 19 of the Regulations for the Implementation of the Individual Income Tax Law of the People’s Republic of China (amended in 2018):
In Paragraph 3, Article 6 of the Individual Income Tax Law, the term “individuals who donate their income to philanthropic and charitable undertakings such as education, poverty alleviation and poverty relief” means individuals who donate their income to philanthropic charitable undertakings such as education, poverty alleviation and poverty relief through philanthropic social organizations and state organizations within the territory of China. The term “taxable income amount” refers to the amount of taxable income before deducting the amount of donation.
Corporate donations
According to Article 9 of the Enterprise Income Tax Law of the People’s Republic of China (amended in 2018):
The portion of the public welfare donation expenditure incurred by an enterprise that is within 12% of the total annual profits is permitted to be deducted when calculating the taxable income amount; and the portion exceeding 12% of the total annual profits is permitted to be deducted when calculating the taxable income within 3 years after the carryforward.
According to the Notice on the Policies Related to Pre-tax Carryforward and Deduction of Enterprise Income Tax for Public Welfare Donations (Document No. 15 [2018] Finance and Tax):
The portion of the donation expenditure incurred by an enterprise for charitable activities and philanthropic undertakings through philanthropic social organizations, people’s government at or above county-level and its directly affiliated institutions that is within 12% of the total annual profits is permitted to be deducted when calculating the taxable income amount; and the portion exceeding 12% of the total annual profits is permitted to be deducted when calculating the taxable income within 3 years after the carryforward. The portion of the donation expenditure incurred by the enterprise in the current year or carried forward from previous years that is permitted to be deducted before tax in the current year shall not exceed 12% of the total annual profits of the enterprise in the current year. The portion of the philanthropic donation expenditure incurred by the enterprise that is not deducted before tax in the current year is permitted to be carried forward to and deducted in the following years, but the carryforward period shall not exceed 3 years from the following year of the year in which the donation is made. When calculating and deducing the philanthropic donation expenditure, enterprise shall deduct the donation expenditure carried forward from previous years first, and then deduct the donation expenditure incurred in the current year.
Beijing UFCH has obtained the qualification.
Announcement on the List of Philanthropic Social Organizations Eligible for Pre-tax Deduction for Philanthropic Donations in Beijing in 2019
Source: Beijing Municipal Bureau of Finance
Release date: 09:38, May 27th 2020
Document No. 848 [2020] Beijing Finance and Tax
It is hereby notified.
According to relevant provisions in the Notice of Ministry of Finance, State Taxation Administration and Ministry of Civil Affairs on Relevant Adjustment Matters of the Confirmation and Approval of the Pre-tax Deduction Qualification for Public Welfare Donations Forwarded by Beijing Municipal Bureau of Finance, Beijing Municipal Tax Service of State Taxation Administration, Beijing Local Taxation Bureau and Beijing Municipal Bureau of Civil Affairs (Document No. 297 [2016] Beijing Finance and Tax), the list of philanthropic social organizations eligible for pre-tax deduction for philanthropic donations in Beijing in 2019 is hereby released after review and approval.
Attachment: List of Philanthropic Social Organizations Eligible for Pre-tax Deduction for Philanthropic Donations in Beijing in 2019
By Beijing Municipal Bureau of Finance, Beijing Municipal Tax Service of State Taxation Administration and Beijing Municipal Bureau of Civil Affairs
May 26th, 2020
