Laws of the People's Republic of China

Circular of the State Administration of Taxation on Regulating the Criterion for the Pre-income-tax Deduction of Advertisement Disbursements of Clothes Production Enterprises

Guo Shui Fa [2006] No. 107

The state taxation bureaus and local taxation bureaus of all provinces, autonomous regions, municipalities directly under the Central Government, and city specifically designated in the state plan,

The Circular of the State Administration of Taxation on the Follow-up Management of the Enterprise Income Tax Inspection and Approval Items Which Have Been Canceled or Shifted to the Lower Level Tax Agencies for Management (Guo Shui Fa [2004] No. 82) prescribes that "It shall be separately stipulated by the State Administration of Taxation under the actual conditions, if it is really necessary to increase the rate of deduction of advertisement disbursements in a special sector", the matters concerning the criterion for the pre-income-tax deduction of advertisement disbursements of clothes production enterprises are hereby promulgated as follows :

As of January 1, 2006, a clothes production enterprise may, in each tax year, deduct the actual advertisement disbursements that satisfy the circumstances as described in Article 41 of the Measures for Pre-tax Deduction Concerning the Enterprise Income Tax (Guo Shui Fa [2000] No.84), at a rate of 8 percent of the sales (business) revenue, the excessive portion may be carried down to the subsequent years without any limit.

The taxation departments at all levels shall strictly examine the genuineness and rationality of the advertisement disbursements of clothes enterprises in accordance with relevant provisions of the State Administration of Taxation, and shall carry out the aforesaid policy when the enterprises pay the enterprise income tax in advance on a monthly or quarterly basis in the current year.

The State Administration of Taxation

July 19, 2006