The following is guidance translated from information published by the State Administration of Taxation.
Basic concepts:
Charitable donations are made by enterprises through charitable social organizations or county-level and higher levels of government and their constituent departments, for charitable causes listed in the “Charitable Donation Law of the People’s Republic of China”.
Charitable social organizations are social groups such as foundations and charities that meet the following standards:
(a) Registered in accordance with the law, with legal entity qualifications.
(b) For the purpose of charity instead of profit.
(c) All assets are owned by the legal entity.
(d) The proceeds and operating balances are mainly used for the purposes for which the legal entity was established.
(e) The remaining property after termination does not belong to any individual or profit-making organization.
(f) Not to operate a business unrelated to the purpose for which the legal entity was established.
(g) Have a sound financial accounting system.
(h) Donors do not participate in any form in the distribution of the property of the legal entity.
(i) Meet the standards set by the State Council’s financial and taxation departments, the State Council’s civil affairs departments and other registration authorities.
Basic regulations for charitable donation pre-tax deduction
The part of donation expenditure which is within 12 percent of the enterprise’s total annual profits is allowed to be deducted when calculating taxable income. The part over 12 percent is allowed to be carried forward for deduction for the next three years in the calculation of taxable income.
Specific regulations for charitable donation pre-tax deduction
(a) Donations for poverty alleviation
From Jan 1, 2019 to Dec 31, 2025, charitable donations for poverty alleviation made by companies through charitable social organizations or county-level and higher levels of government and their constituent departments and agencies directly under them, are allowed to be deducted when calculating the taxable income of enterprise’s income tax.
(b) Donations for the Beijing 2022 Winter Olympic Games, Beijing 2022 Winter Paralympic Games, and the test events.
For enterprises, social organizations and groups to sponsor and donate funds, materials and services for the Beijing 2022 Winter Olympic Games, the Winter Paralympic Games and the test events, full deduction shall be made when calculating the taxable income of the fore-mentioned entities.
(c) Donations for the Hangzhou 2022 Asian Games
For enterprises, social organizations and groups to sponsor and donate funds, materials and services for the Hangzhou 2022 Asian Games, full deduction shall be made when calculating the taxable income of the fore-mentioned entities.
Eligibility for charitable donation pre-tax deduction
Charitable social organizations or county-level and higher levels of government and their constituent departments in accepting donations, should use, in accordance with their administrative level, receipts issued by the Ministry of Finance or the finance departments of provinces, autonomous regions and municipalities. These documents should also be stamped with the seal of the recipients. Enterprises will be eligible for pre-tax deductions of charitable donations if they retain the fore-mentioned documents for future inspection.
Unless otherwise specified, charitable social organizations or county-level and higher levels of government and their constituent departments in accepting corporate or individual donations, should confirm the amount of donations in accordance with the following principles.
(a) For monetary asset donations, the actual amount received should be used to confirm the amount of the donation.
(b) For non-monetary asset donations, their fair value should be used to confirm the amount of the donation. Donors donating to charitable social organizations or county-level and higher levels of government and their constituent departments, should provide proof of the fair value of donated non-monetary assets. Without any proof, the recipient of the donation shall not issue a donation receipt to the donor.
Expenses related to the donation of non-monetary assets
For expenses incurred from freight, insurance, and labor costs, as well as other related spending in the process of donating non-monetary assets, the amount that is included in the receipt documents by the recipients will be regarded as charitable donations and benefit from pre-tax deductions in accordance with the welfare donation pre-tax deduction regulations. Costs that are not accounted for in the receipts will be regarded as enterprise-related expenses and be given a corresponding pre-tax deduction.
