After so many years of working as an accountant, I think it is essential to keep abreast of policy changes. Today, I would like to share with you a new regulation on corporate income tax.
Interpretation of the Ministry of Finance's new policy on pre-tax deduction of public welfare donation bills:
Recently, China's Ministry of Finance issued an important policy document - "Administrative Measures for the Use of Public Welfare Donation Bills", the introduction of this regulation, undoubtedly for the majority of enterprises and individuals to bring new good news to the public welfare donations. From February 1, 2024, the donation bill for public welfare undertakings will officially become a valid voucher for pre-tax deduction, which will further encourage all sectors of society to actively participate in public welfare activities, and also provide tangible tax incentives for donors.
The donation bill for public welfare is no longer just evidence to prove the donation, but has been upgraded to an original accounting voucher with legal effect, covering both electronic and paper forms. Whether it is an electronic bill or a paper bill, it has been unanimously recognized by the financial, tax, auditing, supervision and other departments as an important basis for supervision and inspection. The bill contains detailed donation information, such as payer information, donation item, amount, time, etc., to ensure the transparency and legitimacy of the donation transaction.
The Ministry of Finance or the provincial financial department shall supervise the production of public welfare donation bills and print the seal of the supervision of financial bills, which ensures the consistency of the format, coding rules and electronic data standards of donation bills nationwide. For electronic bills, the user and the payment unit must be properly kept and correctly handled, and included in the account books and records in accordance with the requirements of accounting informatization and accounting file management.
For taxpayers, the key to pre-tax deduction is to donate through formal channels, that is, through public welfare social organizations or people at or above the county level, and to ensure that legal and valid public welfare donation bills are obtained. Especially for individual donors, if they do not obtain the donation bill in time, they can temporarily deduct it with the bank payment voucher, but they must supplement the donation bill within 90 days after the donation. In the case of unified donations by enterprise groups, they can also be used to make pre-tax expenditures in the enterprise income tax by virtue of the public welfare donation bills issued by the recipient and relevant detailed information.
Detailed explanation of precautions for public welfare donations:
The choice of donation route is crucial. According to the current implementation regulations of enterprise income tax and individual income tax, only donations made through public welfare social organizations or ** departments that meet the requirements can enjoy pre-tax deduction treatment.
The goal of the donation must be clear. Donations must be used for public welfare and charitable activities, which is a prerequisite for pre-tax deductions.
Acquisition and custody of donation vouchers. Whether it is an individual or a business, you need to keep the donation receipt properly. Individual donors are required to provide additional bills within the specified time limit, while enterprises need to prepare complete supporting materials according to the specific circumstances of the donation, such as transfer vouchers, donation statements, etc.
The impact of the form of donation. When an enterprise makes a non-cash donation, it will be treated as a sale, but within a certain period of time, the materials donated to the target poverty alleviation areas can enjoy the preferential policy of VAT exemption.
How to make a pre-tax deduction for public welfare donations:
When an enterprise makes a public welfare donation, the part of its expenditure within 12% of the total annual profit can be directly deducted when calculating the taxable income of the current year. If the part exceeds 12% of the total annual profit, it is allowed to carry forward the deduction in the calculation of taxable income in the next three years. Of course, if the state has other provisions on full deduction, the enterprise can still implement the full deduction.
The Ministry of Finance's new policy on donation bills for public welfare undertakings not only further standardizes the management and use of donation bills, but also effectively protects the rights and interests of donors, encourages more social forces to devote themselves to public welfare undertakings through reasonable tax policies, and jointly promotes social harmony and progress. In the specific operation process, corporate and individual donors need to follow the relevant regulations to ensure that the donation behavior is legal and compliant, so as to fully enjoy the corresponding tax incentives.
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