Administrative Measures for Enterprise Income Tax Pre-tax Deduction Vouchers

企业所得税税前扣除凭证管理办法 (中文)

STA Announcement [2018] No.28 — Issued by the State Taxation Administration on June 6, 2018. Effective from July 1, 2018.

Sources:

• Chinese text: 广东省税务局 (Guangdong Provincial Tax Service)

All information in this document is authentic in Chinese. English is provided for reference only. In case of any discrepancy, the Chinese version shall prevail.

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Article 1

These Measures are formulated in accordance with the Enterprise Income Tax Law of the People's Republic of China (hereinafter the "EIT Law") and its Implementation Regulations, the Tax Collection and Administration Law and its implementing rules, the Administrative Measures on Invoices and their implementing rules, and other relevant provisions, in order to regulate the management of pre-tax deduction vouchers for enterprise income tax.

Article 2

Pre-tax deduction vouchers as referred to in these Measures are documents of all types used by an enterprise, when computing taxable income for EIT purposes, to prove that reasonable expenditures related to deriving income have actually been incurred, and on the basis of which such expenditures are deducted before tax.

Article 3

"Enterprises" as referred to in these Measures means resident enterprises and non-resident enterprises as defined in the EIT Law and its Implementation Regulations.

Article 4

The management of pre-tax deduction vouchers shall follow the principles of authenticity, legality, and relevance.

• Authenticity — the vouchers reflect genuine economic transactions, and the expenditures have actually been incurred.
• Legality — the form and source of the vouchers comply with relevant national laws, regulations, and other provisions.
• Relevance — the vouchers are related to and serve as evidence for the expenditures they reflect.

Article 5

When an enterprise incurs expenditures, it shall obtain pre-tax deduction vouchers to serve as the basis for deducting the relevant expenditures when computing taxable income.

Article 6

An enterprise shall obtain its pre-tax deduction vouchers before the end of the annual settlement and filing period (汇算清缴期) for EIT as prescribed by the EIT Law for that year.

Article 7

An enterprise shall retain for future inspection all materials related to its pre-tax deduction vouchers, including contracts and agreements, expenditure documentation, and payment vouchers, in order to verify their authenticity.

Article 8

Pre-tax deduction vouchers are classified by source into internal vouchers and external vouchers.

Internal vouchers are original accounting documents prepared by the enterprise itself for accounting of costs, expenses, losses, and other expenditures. Their preparation and use shall comply with national accounting laws and regulations.

External vouchers are documents obtained from other entities or individuals in the course of business activities to prove that expenditures have been incurred, including but not limited to fapiao (invoices, both paper and electronic), fiscal receipts, tax payment certificates, payment receipts, and allocation statements (分割单).

Article 9

Where an enterprise's domestic expenditures fall within VAT-taxable items ("taxable items"):

1. If the counterparty is a registered VAT taxpayer that has completed tax registration, the enterprise shall use a fapiao (including fapiao issued on the taxpayer's behalf by the tax authority) as the pre-tax deduction voucher.
2. If the counterparty is an entity not legally required to complete tax registration, or an individual engaged in small-amount and sporadic business operations, the enterprise may use a fapiao issued by the tax authority on the counterparty's behalf, or a payment receipt together with an internal voucher. The receipt shall state the name of the receiving entity, the individual's name and ID number, the expenditure item, and the amount.

The threshold for small-amount and sporadic business operations is that the individual's sales do not exceed the VAT threshold prescribed in relevant policies.

Where the STA has separate provisions requiring fapiao for specific taxable items, the fapiao or documents specified therein shall be used.

Article 10

Where an enterprise's domestic expenditures do not fall within taxable items:

1. If the counterparty is an entity, the enterprise shall use external vouchers other than fapiao issued by the counterparty.
2. If the counterparty is an individual, the enterprise shall use internal vouchers.

Where the expenditures do not fall within taxable items but fapiao may be issued pursuant to STA provisions, fapiao may be used.

Article 11

For expenditures arising from the purchase of goods or services from overseas, the enterprise shall use a fapiao issued by the counterparty, or a payment receipt of an invoice nature, together with relevant tax payment certificates, as the pre-tax deduction voucher.

Article 12

Fapiao that are privately printed, forged, altered, voided, illegally obtained, falsely issued, or improperly completed (hereinafter "non-compliant fapiao"), and other external vouchers that do not comply with national laws or regulations (hereinafter "non-compliant other external vouchers"), shall not be used as pre-tax deduction vouchers.

Article 13

Where an enterprise should have obtained but has not obtained a fapiao or other external voucher, or has obtained a non-compliant one, and the expenditure is genuine, the enterprise shall request the counterparty to supplement or replace the voucher before the end of the annual settlement and filing period. A compliant replacement may be used as a pre-tax deduction voucher.

Article 14

Where the counterparty is unable to supplement or replace due to special reasons such as deregistration, revocation, having its license revoked, or being classified as an abnormal taxpayer (非正常户), the enterprise may prove authenticity with the following materials:

1. Evidentiary materials explaining the reasons (proof of deregistration, dissolution, abnormal status, bankruptcy, etc.);
2. The contract or agreement for the relevant business activity;
3. Payment vouchers for payments made through non-cash means;
4. Evidentiary materials for goods transportation;
5. Internal vouchers for goods received and dispatched;
6. Enterprise accounting records and other materials.

Items (1) through (3) are mandatory.

Article 15

After the annual settlement and filing period, if the tax authority discovers non-compliance and notifies the enterprise, the enterprise shall supplement or replace the voucher within 60 days from the date of notification. Where the counterparty is unable to do so due to special reasons, the enterprise shall provide materials per Article 14 within 60 days.

Article 16

Where the enterprise fails to supplement or replace a compliant voucher within the prescribed period and also fails to provide materials per Article 14, the expenditure shall not be deducted before tax in the year incurred.

Article 17

Except for Article 15 situations, where an enterprise should have obtained but did not obtain a voucher in a prior year, the expenditure may be retroactively deducted in the year incurred if a compliant voucher is subsequently obtained or materials per Article 14 are provided. The retroactive period shall not exceed five years.

Article 18

Where an enterprise and other enterprises (including related enterprises) or individuals jointly receive VAT-taxable services and adopt an expense-sharing arrangement, expenses shall be shared per the arm's length principle. The enterprise shall use fapiao and allocation statements (分割单) as pre-tax deduction vouchers; the other jointly receiving enterprises shall use the allocation statements as their vouchers.

For non-taxable services with expense-sharing, the enterprise shall use other external vouchers (not fapiao) together with allocation statements.

Article 19

Where an enterprise leases office space, production facilities, or other assets and incurs utility expenses (water, electricity, gas, heating, telecommunications, cable TV, internet), and the lessor issues a fapiao as taxable items, the enterprise shall use the fapiao. Where the lessor adopts expense-sharing, the enterprise shall use other external vouchers issued by the lessor.

Article 20

These Measures shall take effect on July 1, 2018.