Law of the People's Republic of China on Enterprise Income Tax (Revised in 2017) 

Order of the President No.64

February 24, 2017

(Adopted at the 5th Session of the 10th National People's Congress on March 16, 2007; revised according to the Decision of the Standing Committee of the National People's Congress on Revising the Law of the People's Republic of China on Enterprise Income Tax at the 26th Meeting of the Standing Committee of the 12th National People's Congress of the People's Republic of China on February 24, 2017)

Chapter I General Provisions
Chapter II Taxable Income
Chapter III Payable Tax
Chapter IV Preferential Tax Treatment
Chapter V Tax Withheld at Source
Chapter VI Special Tax Payment Adjustment
Chapter VII Administration of Tax Collection
Chapter VIII Supplementary Provisions

Chapter I General Provisions

Article 1 Enterprise income tax payers shall be enterprises within the People's Republic of China and other organizations that obtain income within the People's Republic of China (hereinafter referred to as "Enterprises") and shall pay enterprise income tax in accordance with the provisions of this Law.
This Law shall not apply to wholly individually-owned enterprises and partnership enterprises.

Article 2 Enterprises are divided into resident enterprises and non-resident enterprises.
For the purposes of this Law, the term "resident enterprises" shall refer to Enterprises that are set up in China in accordance with the law, or that are set up in accordance with the law of the foreign country (region) whose actual administration institution is in China.
For the purposes of this Law, the term "non-resident enterprises" shall refer to Enterprises that are set up in accordance with the law of the foreign country (region) whose actual administration institution is outside China, but have set up institutions or establishments in China or, without institutions or establishments set up in China, have income originating from China.

Article 3 Resident enterprises shall pay enterprise income tax in relation to their income originating both within and outside China.
Non-resident enterprises that have set up institutions or establishments in China shall pay enterprise income tax in relation to income originating from China obtained by the set up institutions or establishments, and income occurring outside China but having an actual connection with the set-up institutions or establishments.
Non-resident enterprises that have not set up institutions or establishments in China, or have set up institutions or establishments but the income obtained by the said enterprises has no actual connection with the set-up institutions or establishments, shall pay enterprise income tax in relation to their income originating from China.

Article 4 The rate of enterprise income tax shall be 25%.
In respect of non-resident enterprises that have obtained the income stipulated in Paragraph 3 of Article 3 hereof, the applicable tax rate shall be 20%.

Chapter II Taxable Income

Article 5 The balance of an Enterprise's total income in each taxable year deducted by non-taxable income, tax-exempted income, various deductions and permitted offset of losses in previous year(s) shall be the taxable income.

Article 6 Income obtained by Enterprises from various sources in monetary and non-monetary terms shall be the total income, including:
1. income from sales of goods;
2. income from provisions of services;
3. income from transfer of property;
4. income from equity investment such as dividends and bonuses;
5. interest income;
6. rental income;
7. income from royalties;
8. income from donations; and
9. other income.

Article 7 The following income from the total income shall not be taxable:
1. governmental funding;
2. administrative fees and government funds collected and included under governmental fiscal management in accordance with the law; and
3. other non-taxable income prescribed by the State Council.

Article 8 Reasonable expenses that are actually incurred by an Enterprise and are related to the income obtained by the Enterprise, including costs, fees, tax payments, losses and other expenses may be deducted from taxable income.

Article 9 As regards the expenditures for public welfare donations incurred by an enterprise, when computing taxable income, the portion within 12% of the total annual profit may be deducted, and the portion in excess of 12% thereof may be carried forward to be deducted in the following three years.

Article 10 The following expenses shall not be deducted from taxable income:
1. income from equity investment paid to investors such as dividends and bonuses;
2. payment of enterprise income tax;
3. late tax payment fines;
4. penalties, fines, and losses from property confiscation;
5. donation payments other than those prescribed in Article 9 hereof;
6. sponsorship fees;
7. unverified reserve expenditures; and
8. other expenses unrelated to income obtained.

Article 11 In computing taxable income, the depreciation of fixed assets calculated by an Enterprise in accordance with relevant provisions may be deducted.
No depreciation shall be computed and deducted for the following fixed assets:
1. fixed assets, other than houses and buildings, that have not yet been used;
2. fixed assets leased from other parties by means of business lease;
3. fixed assets leased to other parties by means of lease financing;
4. fixed assets that have been depreciated in full but are still in use;
5. fixed assets that are unrelated to business activities;
6. land credited as fixed assets after independent price valuation;
7. other fixed assets for which depreciation must not be calculated.

Article 12 In computing taxable income, the amortization expenses of intangible assets calculated by an Enterprise in accordance with relevant provisions may be deducted.
No amortization expenses shall be computed and deducted for the following intangible assets:
1. intangible assets of which the self-development expenses have been deducted from taxable income;
2. self-created goodwill;
3. intangible assets that are unrelated to business activities; and
4. other intangible assets for which amortization must not be calculated.

Article 13 In the computation of taxable income, the following expenses incurred by an Enterprise as long-term deferred expenses and computed in accordance with relevant provisions may be deducted:
1. reconstruction expenses for fixed assets that have been depreciated in full;
2. reconstruction expenses for fixed assets leased from other parties;
3. expenses for major repairs of fixed assets; and
4. other expenses that ought to be treated as long-term deferred expenses.

Article 14 During the period when an Enterprise invests outside the territory, the cost of investment in assets must not be deducted from taxable income.

Article 15 The cost for inventory used or sold by an Enterprise and calculated in accordance with relevant provisions may be deducted from taxable income.

Article 16 Where an Enterprise transfers assets, the net value thereof may be deducted from taxable income.

Article 17 Where an Enterprise computes its consolidated enterprise income tax, the losses of business institutions outside the territory shall not be offset by the profits of business institutions within the territory.

Article 18 Where an Enterprise sustains losses in a taxable year, they may be brought forward to the succeeding year(s) and be offset by the income of the succeeding year(s), but the period for bringing forward shall not exceed five years.

Article 19 Where a non-resident enterprise has obtained the income stipulated in Paragraph 3 of Article 3 hereof, the taxable income shall be calculated in accordance with the following methods:
1. for income from equity investment such as dividend and bonus, and income from interest, rental and royalties, the total income shall be the taxable income;
2. for income from property transfer, the balance derived from the deduction of the total income with the property's net asset shall be the taxable income;
3. for other income, the taxable income shall be calculated with reference to the aforementioned two methods.

Article 20 The income, the specific scope and standards of deduction and the specific methods of assets taxation treatment required in this Chapter shall be prescribed by the departments in charge of finance and taxation under the State Council.

Article 21 In computing taxable income, where an Enterprise's financial and accounting treatment methods are inconsistent with tax laws and administrative regulations, the computation shall be done in accordance with the tax laws and administrative regulations.

Chapter III Payable Tax

Article 22 The payable tax of an Enterprise is the balance derived from the taxable income of Enterprises multiplied by the applicable rate minus the amount of tax reduction and exemption pursuant to the provisions of this Law regarding preferential tax treatment.

Article 23 The income tax that has been paid outside the territory for the following income obtained by Enterprises may be offset from the payable tax of the current period. The offset limit is the payable tax calculated in accordance with provisions of this Law in respect of the income of such item. The portion in excess of the offset limit may be made up by the balance of the offset amount of the current year out of the annual offset limit within the next five years:
1. the taxable income originating outside China by resident enterprises; and
2. the taxable income obtained outside China by non-resident enterprises but having an acutal connection with the institutions or establishments set up by such non-resident enterprises within China

Article 24 Where income from equity investment such as dividend and bonus originating outside the territory of China is shared by foreign enterprises directly or indirectly controlled by resident enterprises, the portion undertaken by foreign enterprises in the actual income tax actually paid outside the territory by the foreign enterprises may be offset in the offset limit prescribed in Article 23 hereof as the such resident enterprises' overseas income tax that may be offset.

Chapter IV Preferential Tax Treatment

Article 25 The industries and projects that are given key support and encouraged to develop by the State may be given preferential enterprise income tax treatment.

Article 26 The following income of Enterprises is tax-exempted income:
1. income from interests on government bonds;
2. income from equity investment income such as dividend and bonus between qualified resident enterprises;
3. income from equity investment such as dividend and bonus that are obtained from resident enterprises by non-resident enterprises with institutions or establishments in China and have an actual relationship with such institutions or establishments; and
4. income of qualified non-profit organizations.

Article 27 The following income of Enterprises may be entitled to exemption or reduction of enterprise income tax:
1. income from engaging in projects of agriculture, forestry, animal husbandry and fisheries;
2. income from investment and operation of public infrastructure projects under key state support;
3. income from engaging in qualified projects of environmental protection and energy and water conservation;
4. income from qualified transfer of technology; and
5. income prescribed by Paragraph 3 of Article 3 hereof.

Article 28 Qualified small low-profit Enterprises are given the reduced enterprise income tax rate of 20%.
High and new technology Enterprises to which the State need to give key support are given the reduced enterprise income tax rate of 15%.

Article 29 The autonomous authority of an ethnic autonomous region may decide on the reduction or exemption of the portion of enterprise income tax shared by the regional finance that shall be paid by Enterprises of the region. Where an autonomous prefecture or autonomous county decides on the reduction or exemption, it must report the same to the people's government of the local province, autonomous region or municipality directly under the central government for approval.

Article 30 The following expenses of Enterprises may be additionally deducted at the time of calculating taxable income:
1. research and development expenses incurred by Enterprises in the development of new technologies, new products and new techniques; and
2. wages paid for job placement of disabled persons and other persons whose employment is encouraged by the State.

Article 31 Venture investment enterprises that engage in venture investment to which the State need to give key support and encouragement may offset the taxable income at a certain ratio of the investment amount.

Article 32 Where it is necessary to accelerate the depreciation of the fixed assets of Enterprises due to technology advancement, the years of depreciation may be shortened or an accelerated depreciation method may be adopted.

Article 33 The income obtained by Enterprises from the production of products in line with state industrial policies through comprehensive use of resources may be deducted from the taxable income.

Article 34 The investment by Enterprises on procurement of special facilities for environmental protection, energy and water conservation and safe production may be offered a tax credit at a certain rate.

Article 35 The specific measures for preferential tax treatment prescribed in this Law shall be formulated by the State Council.

Article 36 As needed by the development of national economy and society, or where there is a significant impact on the business activities of Enterprises due to unexpected public incidents and other reasons, the State Council may formulate special preferential policies on enterprise income tax and report the same to the Standing Committee of the National People's Congress for the record.

Chapter V Tax Withheld at Source

Article 37 The payable income tax on income specified in Paragraph 3 of Article 3 hereof obtained by non-resident enterprises shall be subject to tax withheld at source, with the payer as the withholding agent. The tax payment shall be withheld from the amount paid or the payable amount due from each tax payment and payable amount of the withholding agent.

Article 38 In respect of the payable income tax from income obtained by non-resident enterprises from project works and labor services in China, the tax authority may designate the payer of project price or labor fees as withholding agent.

Article 39 In respect of the income tax that shall be withheld in accordance with Articles 37 and 38 hereof, where the withholding agent has not withheld or failed to perform the withholding obligation in accordance with the law, the taxpayer shall pay in the place where the income generates. Where the taxpayer does not pay in accordance with the law, the tax authority may pursue the payable tax amount of such taxpayer from the amount payable by the payer of other income projects in China of such taxpayer.

Article 40 The withholding agent shall turn the tax payment withheld to the treasury within seven days from the day of withholding, and submit a statement of withholding enterprise income tax to the tax authority of the place where it is located.

Chapter VI Special Tax Payment Adjustment

Article 41 The business transactions between Enterprises and their affiliates that reduce the taxable income or income of such Enterprises and their affiliates not in compliance with independent transaction principle, the taxation authority has the right to make an adjustment with reasonable methods.
The cost incurred in joint development and transfer of intangible assets, or joint provision and acceptance of labor services by Enterprises and their affiliates shall be shared under the independent transaction principle in computing the taxable income.

Article 42 Enterprises may report to the tax authority the pricing principle and calculation method of the transactions between them and their affiliates. Upon negotiation and confirmation with the Enterprises, the tax authority may reach the advance pricing arrangement.

Article 43 Where Enterprises submit to the tax authority the annual enterprise income tax return, they shall enclose a statement of the annual business transactions in respect of the business transactions of the Enterprises and their affiliates.
Where the tax authority conducts affiliated business investigation, Enterprises and their affiliates, and other enterprises relevant to the affiliated business investigation shall provide the relevant information in accordance with provisions.

Article 44 Where Enterprises fail to provide the information of business transactions with their affiliates, or provide false or incomplete information, which cannot faithfully reflect their affiliated business transactions, the tax authority has the right to verify its taxable income legally.

Article 45 Where resident enterprises or Enterprises controlled by resident enterprises and Chinese residents and established and in the country (region) where the actual tax burden is obviously lower than the tax rate prescribed by Paragraph 1 of Article 4 hereof do not distribute profits or reduce the profits to be distributed due to reasons other than reasonable business needs, the portion of the above profits belonged to such resident enterprises shall be included in the income of such resident enterprises of the current period.

Article 46 The interest fee incurred in excess of the prescribed standard obtained by Enterprises from the loan investment and equity investment of their affiliates may not be deducted at the time of calculating the taxable income.

Article 47 Where Enterprises implement other arrangement without reasonable business objectives to reduce the payable income or income, the tax authority has the right to make adjustments with reasonable methods.

Article 48 Where additional tax payment is required by a tax authority in respect of the tax payment adjustment made in accordance with the provisions of this Chapter, such additional tax shall be collected, and the interest thereupon shall be collected in accordance with the provisions of the State Council.

Chapter VII Administration of Tax Collection

Article 49 The administration of the collection of enterprise income tax shall follow the provisions of this Law in addition to the Law of the People's Republic of China on the Administration of Tax Collection.

Article 50 Unless otherwise specified by tax laws and administrative regulations, resident enterprises shall take the place of registration of the Enterprise as the place of tax payment; but if the place of registration is outside the territory, the place of tax payment shall be the place where the actual tax administration is located.
Where resident enterprises establish business institutions in China without a legal-person status, enterprise income tax shall be calculated and paid on a consolidated basis.

Article 51 In respect of non-resident enterprises that obtain the income prescribed in Paragraph 2 of Article 3 hereof, the place of tax payment shall be the place where the institution or establishment is located. Non-resident enterprises that set up two or more institutions or establishments in China may, upon the examination and approval of the tax authority, select its main institution or establishment to pay the consolidated enterprise income tax.
Where non-resident enterprises obtain the income prescribed in Paragraph 3 of Article 3 hereof, the place of tax payment shall be the place where the withholding agent is located.

Article 52 Enterprises may not pay consolidated enterprise income tax unless otherwise prescribed by the State Council.

Article 53 Enterprise income tax shall be calculated in accordance with the taxable year which starts from January 1 to December 31 of a calendar year.
If an Enterprise commences business or terminates its business activities during the taxable year and the actual business period of such taxable year is less than 12 months, the actual business period shall be treated as a taxable year.
Where the Enterprise is liquidated in accordance with the law, the liquidation period shall be a taxable year.

Article 54 Enterprise income tax shall be prepaid on a monthly or quarterly basis.
Enterprises shall submit a prepaid enterprise income tax return to the tax authority within 15 days from the completion of a month or quarter to make tax prepayment.
Enterprises shall submit an annual enterprise income tax return to the tax authority within five months from the completion of a year and make the settlement of the payable and refundable tax payment.
Enterprises that submit the enterprise income tax return shall enclose a financial report and other relevant information in accordance with provisions.

Article 55 Where Enterprises terminate business activities in the midst of the year, they shall handle with the tax authority the settlement and payment of enterprise income tax of the current period within 60 days from the actual termination of business.
Enterprises shall, prior to handling registration cancellation, file a return of the income liquidated and pay enterprise income tax in accordance with the law.

Article 56 Enterprise income tax paid in accordance with this Law is calculated in Renminbi. Where the income is calculated in a currency other than Renminbi, it shall be converted into Renminbi for tax payment.

Chapter VIII Supplementary Provisions

Article 57 Enterprises set up with approval prior to the promulgation of this Law which enjoy low preferential tax rate in accordance with the tax laws and administrative regulations at the the period may, pursuant to the provisions of the State Council, gradually transit to the tax rate provided herein within five years of the implementation of this Law. Where such enterprises enjoy regular tax exemption and reduction, the treatment may continue to apply until expiry after the implementation of this Law. However, those that fail to be entitled to this treatment by reason of not making any profits, the preferential period shall be calculated from the year this Law is implemented.
High and new technology enterprises that are set up in a specific zone in accordance with the law for the purpose of external economic cooperation and technology exchange and that are newly set up and need key state support in the region of special policy of such region specified by the State Council may be eligible for transitional treatment, and the specific measures shall be provided by the State Council.
Other enterprises in the category of encouragement as confirmed by the state may be eligible for tax exemption and reduction in accordance with the provisions of the State Council.

Article 58 Where agreements on taxation concluded by the People's Republic of China and foreign governments contain different provisions, such agreements apply.

Article 59 The implementing regulations shall be formulated by the State Council on the basis of this Law.

Article 60 This Law shall come into effect as of January 1, 2008. The Income Tax Law of the People's Republic of China on Foreign-invested Enterprises and Foreign Enterprises adopted at the Fourth Session of the Seventh National People's Congress on April 9, 1991 and the Interim Regulations of the People's Republic of China on Enterprise Income Tax promulgated by the State Council on December 13, 1993 shall be repealed simultaneously.