(the “Announcement”) (关于企业所得税应纳税所得额若干问题的公告), issued by the State Administration of Taxation (“SAT”)
This Announcement of May 23, 2014, clarifies the following matters related to the taxable income EIT:
TRANSFERS OF ASSETS FROM SHAREHOLDERS TO THE SUBSIDIARY
- The assets that a subsidiary receives as equity contribution do not trigger a taxable income in the hands of the recipient, contrary to the recipient of assets for no consideration, in which case the taxable income for the subsidiary is the fair market value of the assets.
DEPRECIATION OF FIXED ASSETS
- When the accounting depreciation period is shorter than the tax depreciation period, the difference between the accounting and the tax depreciations must be added to the taxable base. When assets have been fully depreciated under accounting rules, the tax depreciation is deductible for EIT purposes.
- The tax depreciation rate must be the same as the accounting rate w hen the accounting depreciation period is longer than the minimum tax depreciation period, except for fixed assets eligible for accelerated tax depreciation.
- Provisions for accounting impairment of fixed assets are not be deductible for EIT purposes, and the tax depreciation of those assets is calculated according to their tax basis.
Date of issue: May 23, 2014. Date of effectiveness: May 23, 2014.