Laws of the People's Republic of China

Circular of the Ministry of Finance and the State Administration of Taxation on the Policies and Related Management Issues concerning the Pre-tax Deduction of Public Welfare Relief Donations

Cai Shui Fa [2007] No.6 January 18, 2007

The finance departments (bureaus), state taxation bureaus and local taxation bureaus of all provinces, autonomous regions, municipalities directly under the Central Government, and cities specifically designated in the state plan, and the Financial Bureau of Xinjiang Production and Construction Corporations,

For the purpose of further promoting the development of social pubic welfare undertakings, the related policies and related management issues on the pre-tax deduction of public welfare relief donations are hereby announced as follows:

1.

As regards welfare social organizations or foundations which are established upon the approval of civil affairs administrative department in accordance with the Regulations for the Administration of the Social Groups Registration (Order No. 250 of the State Council) and the Regulations for the Administration of Foundations (Order No. 400 of the State Council), if the related provisions are met, and upon confirmation of the public finance and taxation authorities, it may accept the public welfare relief donations granted by the taxpayers. The pre-tax deduction of the said donations is permitted when calculating and paying the enterprise or individual income taxes pursuant to current tax laws, regulation and related policies.

As regards any welfare social organization or foundation that is established upon approval of the civil affairs administrative department under the State Council, the qualification for pre-tax deduction of donations shall be confirmed by the Ministry of Finance and the State Administration of Taxation, as regards any welfare social organization or foundation that is established upon approval of the civil affairs administrative department under the provincial people's government, the qualification for pre-tax deduction of donations shall be confirmed by the provincial finance and taxation authorities, and be submitted to the Ministry of Finance and the State Administration of Taxation for archival purpose.

State departments for accepting public welfare relief donations mean the people's governments at or above the county level and their departments.

2.

A non-profitable public welfare social organization or foundation that applies for the qualification for pre-tax deduction of donations shall satisfy the requirements as follows:

(1)

It is devoted to provide services to the general public and does not focus on making profits;

(2)

It has the qualification of a public welfare legal person, and its property management and use is in line with all the laws and administrative regulations;

(3)

The public welfare legal person possesses the total assets and increments;

(4)

Its earnings and operational surplus are mostly used for the activities conforming to the purposes of its creation;

(5)

The remained estate can not be attributed to any individual or profit-making group when it is terminated or dissolved;

(6)

It can not develop any business irrelevant to the public welfare purpose;

(7)

It has sound financial and accounting systems;

(8)

It has the organizational body that does not intend for making private profits;

(9)

Any donator may be prohibited to participate in the distributions of the assets of this organization by any means, nor may it/he has ownership to such assets.

3.

A non-profitable public welfare social organization or foundation that applies for qualification for pre-tax deduction of donations shall file the materials as follows:

(1)

an report concerning the application for the pre-tax deduction of donations;

(2)

the registration approval document as issued by the civil affairs administrative department under the State Council or the provincial people's government;

(3)

its articles of association, and the circumstances on capital sources and use for the recent years as well.

4.

Those non-profitable public welfare social organizations and foundations that have the qualification for pre-tax deduction of donations, and the people's governments at or above the county level and their departments must use the public welfare relief donations that it has accepted for the scope of education, civil affairs, and other public welfare business, or for the districts that suffer from natural disasters or the poverty-stricken districts as prescribed by tax laws or regulations.

5.

Those non-profitable public welfare social organizations and foundations that have the qualification for pre-tax deduction of donations, and the people's governments at or above the county level and their departments shall use the vouchers of public welfare relief donations as uniformly printed under supervision of the central or provincial public finance department respectively subject to the financial affiliation when accepting donations or transferring donations, and attach their respective special financial seals; and shall issue receipts for any individual that requests for it for his donations.

6.

A taxpayer shall offer the following materials in addition when declaring the pre-tax deduction of public welfare relief donations:

(1)

certification materials on the qualification for pre-tax deduction of donations of the non-profitable public welfare social organization or foundation that has accepted or transferred donations;

(2)

the vouchers or receipts of public welfare relief donations as issued by the non-profitable public welfare social organization or foundation that has the qualification for pre-tax deduction of donations and the people's governments at or above the county level or any of it departments; and

(3)

other materials as required to be submitted by the competent taxation authority.

7.

The competent taxation authority shall manage the check of the use of public welfare relief donations by non-profitable public welfare social organizations or foundations, and if any violation of the articles of association by a non-profitable public welfare social organization or foundation is found or any non-profitable public welfare social organization or foundation uses any donations for any purpose other than those prescribed in its own articles of association, the income taxes on the earnings from donations and other kinds of earnings shall be levied, and the qualification for pre-tax deduction of donations it has confirmed shall be cancelled.

8.

This Circular shall come into force as of the date of issuance.