|

Pre-Tax Deduction Policies for Advertising and Promotional Expenses

China Clarifies Pre-Tax Deduction Policies for Advertising and Promotional ExpensesPre-Tax Deduction Policies for Advertising and Promotional ExpensesChina’s Ministry of Finance  and the State Administration of Taxation jointly released the Circular Regarding Pre-tax Deduction Policies on Advertising and Business Promotion Expenses, which is retroactively effective from January 1, 2012 and will remain in effect through December 31, 2015. The purpose of the Circular is to address the dilemma faced by enterprises which incur significant annual advertising and promotional expenses in certain industries, but cannot deduct the such expenses in excess of 15 percent of the sales revenue of the current year.

According to the Circular, enterprises engaged in the manufacturing and sale of cosmetics, manufacturing of pharmaceuticals, and the manufacturing of beverages (excluding enterprises producing alcoholic drinks) are eligible to deduct advertising and promotional fees which are less than 30 percent of the sales (business) incomes of the current year. The excess amounts can be carried forward to future years for deduction.

Where the affiliated enterprises have entered into advertising and business promotion expense sharing agreements (hereinafter referred to as “sharing agreements”), the advertising and business promotion expenses incurred by one party that do not exceed the pre-tax deduction limit of sales (business) revenue of the current year can be deducted from the taxable income of the said party. Alternatively, part or all of such expenses may be accumulated to the other party for deduction in accordance with the sharing agreement. When calculating the deductible advertising and business promotion expenses of the other party, the other party may exclude the advertising and business promotion expenses accumulated thereto according to the aforesaid measure.

It is anticipated that manufacturers of cosmetics, pharmaceuticals and beverages will benefit from this Circular in the following tax years through to 2015.



Leave a Reply

*

The Contributor

Follow me on twitter: TriaSasin

    Connect with Jasmin:
  1. - Email: Click here

Have Your Say!

Which part of Shenzhen has the best quality of life for foreigners?

View Results

Loading ... Loading ...

  1. Etienne Ducrot: Hi, I’m interested to contact this Foundation. Do you know how? Thanks. Etienne
  2. Emma: Hi Jasmin, I’ve read your article about a new medical center opens in Nanshan at the end of this month....
  3. sherry lee: A simple story with great words…I love it.
  4. Evangeline: Awesome piece!
  5. Glenda: Hi there, I enjoy reading through your article post. I wanted to write a little comment to support you.