China recently passed a revision to the law on corporate tax, which incorporated improved tax relief on charitable donations aimed at increasing the amount donated, according to China News Service (CNS).
The original tax law allowed a company’s donations, equivalent to 12 percent or less of the company’s total profit, to be deducted from the company’s taxable income. Any amount that exceeded the 12 percent limit, according to the law, should be properly taxed.
While the 12 percent rule still applies in tax deduction, the revision, passed by the Standing Committee of the National People’s Congress on Friday, allows the part that exceeds the limit to be carried forward and deducted within the next three years.
With the adjustment, China is now ahead of many countries in terms of the scale of tax deduction in encouraging charitable donations, said Zhang Tianli, deputy director-general of the Ministry of Finance’s department of fiscal policy, according to CNS.
While it’s common practice globally to apply a pre-tax deduction standard for donations, countries like the United States and the Netherlands have kept the limit at only 10 percent, CNS quoted the ministry as stating earlier.