Measures for the administration of pre-tax deduction vouchers for enterprise income tax were promulgated and will come into force on July 1.

　　BEIJING, June 13 (Xinhua) According to the website of State Taxation Administration of The People’s Republic of China, recently, State Taxation Administration of The People’s Republic of China issued the Measures for the Administration of Pre-tax Deduction Certificates of Enterprise Income Tax (hereinafter referred to as the Measures), which came into effect on July 1, 2018.

　　On the 13th, the State Administration of Taxation issued a related interpretation in official website, stating that there are many kinds of pre-tax deduction vouchers, wide sources and many situations. The Measures clarify the related concepts, application scope, management principles, types, tax treatment of basic situations and tax treatment of special situations from the perspective of unified understanding, easy judgment and easy operation. At the same time, the "Measures" always runs through the concept of "combining management with release and optimizing services", which will play a positive role in thoroughly implementing the spirit of "streamline administration, delegate power, strengthen regulation and improve services" reform in the tax system. First, the Measures clarify that receipts, internal vouchers and split vouchers can also be used as pre-tax deduction vouchers, which will reduce the tax burden of taxpayers. Second, the "Measures" have detailed provisions on the types, filling contents, acquisition time, replacement and replacement requirements of pre-tax deduction vouchers, which is beneficial for enterprises to strengthen their own financial management and internal control management and reduce tax risks. Third, in view of the fact that enterprises have not obtained external vouchers or obtained non-compliant external vouchers, the Measures provide remedial measures to protect the legitimate rights and interests of taxpayers.

　　Interpretation shows that the taxpayers subject to the Measures are resident enterprises and non-resident enterprises as stipulated in the Enterprise Income Tax Law and its implementing regulations.

　　According to the interpretation, since it is difficult to list the pre-tax deduction vouchers one by one, clarifying the management principles is conducive to eliminating disputes and ensuring that taxpayers and tax authorities jointly follow and standardize the handling. Pre-tax deduction vouchers should follow the principles of authenticity, legality and relevance in management. Authenticity is the foundation. If the economic business and expenditure of an enterprise are not authentic, it will naturally not involve the issue of pre-tax deduction. Legality and relevance are the core. Only when the form and source of the pre-tax deduction voucher comply with the relevant provisions of laws and regulations, and are related to the expenditure and have probative force, can it be used as the proof of the pre-tax deduction of enterprise expenses.

　　The interpretation also explains the following contents:

　　— — Relationship between pre-tax deduction voucher and pre-tax deduction

　　Pre-tax deduction voucher is the basis for enterprises to deduct relevant expenses when calculating taxable income of enterprise income tax. The scope and standard of pre-tax deduction of enterprise expenditure shall be implemented in accordance with the enterprise income tax law and its implementation regulations.

　　— — The Relationship between Pre-tax Deduction Voucher and Relevant Information

　　In business activities and economic exchanges, enterprises are often accompanied by contract agreements, payment vouchers and other related materials. In some cases, they are the basis for expenditures, such as the judgment documents issued by the court to judge enterprises to pay liquidated damages. The above information does not belong to the pre-tax deduction certificate, but belongs to the information that is directly related to the business activities of the enterprise and can prove the authenticity of the pre-tax deduction certificate. The enterprise should also fulfill the responsibility of keeping it in accordance with the relevant provisions of laws and regulations for verification by relevant departments, institutions or personnel, including the tax authorities.

　　— — Types of pre-tax deduction vouchers

　　According to the source of pre-tax deduction vouchers, the Measures divide them into internal vouchers and external vouchers. Internal vouchers refer to the original accounting vouchers that enterprises fill in for accounting expenses according to national accounting laws, regulations and other relevant provisions when expenditures occur. For example, the original accounting vouchers such as wages paid by enterprises to employees, payroll and so on are internal vouchers. External vouchers refer to invoices, financial bills, tax payment vouchers, split sheets and payment vouchers issued by other units and individuals when an enterprise has business activities and other matters. Among them, invoices include paper invoices and electronic invoices, as well as invoices issued by tax authorities.

　　— — Time requirement for obtaining pre-tax deduction certificate

　　Enterprises should obtain the pre-tax deduction vouchers that meet the requirements when spending occurs. However, considering that enterprises may need to reissue or replace the pre-tax deduction vouchers that meet the requirements in some cases, the Measures stipulate that enterprises should obtain the pre-tax deduction vouchers that meet the requirements before the end of the final settlement period stipulated in the current enterprise income tax law.

　　— — Tax treatment of external vouchers

　　If an enterprise obtains invoices and other external vouchers that meet the requirements within the prescribed time limit, the corresponding expenses can be deducted before tax. Those who should have obtained invoices and other external vouchers, or those who have obtained non-compliant invoices and other non-compliant external vouchers, can be handled in accordance with the following provisions:

　　1. Tax treatment before the end of the settlement period

　　(1) If invoices and other external vouchers that meet the requirements can be reissued or exchanged, the corresponding expenses can be deducted before tax.

　　(2) If the other party is unable to reissue or exchange invoices or other external vouchers that meet the requirements due to special reasons such as cancellation, cancellation, revocation of business license according to law, and being recognized as an abnormal household by the tax authorities, the corresponding expenses can be deducted before tax after the authenticity of the expenses is confirmed by relevant materials.

　　(3) Failing to reissue or exchange invoices and other external vouchers that meet the requirements, and failing to prove the authenticity of expenditures with relevant materials, the corresponding expenditures shall not be deducted before tax in the year in which they occur.

　　2. Tax treatment after the final settlement period.

　　(1) Due to some reasons (such as purchase and sale contracts, engineering project disputes, etc.), if the enterprise fails to obtain the invoices and other external vouchers that meet the requirements within the prescribed time limit or fails to obtain the invoices and other external vouchers that do not meet the requirements, and the enterprise voluntarily fails to make pre-tax deduction, the corresponding expenses can be retroactive to the annual deduction of the expenses after obtaining the invoices and other external vouchers that meet the requirements in future years, and the retroactive deduction period shall not exceed 5 years. Among them, if the other party is unable to reissue or exchange invoices or other external vouchers that meet the requirements due to special reasons such as cancellation, cancellation, revocation of business license according to law, and being recognized as abnormal households by the tax authorities, the corresponding expenses can also be retroactive to the annual deduction of the expenses in future years after the enterprise confirms the authenticity of the expenses with relevant materials, and the retroactive deduction period shall not exceed 5 years.

　　(2) If the tax authorities find that an enterprise should have obtained invoices and other external vouchers, or has obtained non-compliant invoices and other external vouchers, and the enterprise has reissued or replaced the invoices and other external vouchers that meet the requirements within 60 days from the date of being informed, or verified the authenticity of the expenses according to the provisions of Article 14 of the Measures, the corresponding expenses can be deducted before tax in the year in which they occur. Otherwise, the expenditure shall not be deducted before tax in the year in which it occurs, nor shall it be deducted after the year.

　　— — Special provisions

　　1. If there are other provisions on invoicing taxable items in State Taxation Administration of The People’s Republic of China, the specified invoices or bills shall be used as pre-tax deduction vouchers, such as the railway bills printed by China Railway Corporation and its affiliated transportation enterprises (including branches) as stipulated in State Taxation Administration of The People’s Republic of China’s Announcement on Changing the Business Tax of Railway Transportation and Postal Industry to VAT Invoices and Using the Tax Control System (State Taxation Administration of The People’s Republic of China Announcement No.76, 2013).

　　2. Although the expenditure items incurred by enterprises in China are not taxable items, if they can be invoiced according to the regulations of State Taxation Administration of The People’s Republic of China, the invoices can be used as pre-tax deduction vouchers, such as the non-taxable items specified in the Appendix "Classification and Coding Table of Goods and Services Taxes" of Announcement of State Taxation Administration of The People’s Republic of China on Several Issues Concerning the Administration of VAT Invoices (State Taxation Administration of The People’s Republic of China Announcement No.45, 2017).