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Q:
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What is included in non-taxable income?
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A:
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1.
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Financial appropriation
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2.
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Administrative fees and government funds collected by law and included in the financial management
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3.
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Other non-taxable income as stipulated by the State Council.
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The enterprise obtained by the State Council's competent departments of finance and taxation to specify special purposes and approved by the State Council financial funds.
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Enterprises receive the state-owned assets transferred to them without compensation, eligible as non-taxable income (see State Administration of Taxation Announcement No. 29 of 2014).
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The immediately refundable VAT payments obtained by software enterprises may be treated as non-taxable income under the conditions (for details, see Cai Shui [2012] No. 27).
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Interest income from bank deposits of the Social Security Fund managed by the Council of the Social Security Fund and the investment manager of the Social Security Fund, and income obtained by the Social Security Fund from the securities market shall be treated as non-taxable income (for details, see Cai Shui [2008] No. 136).
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Q:
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Is non-taxable income tax-exempt income?
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A:
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No.
Tax-exempt income: taxable income belonging to an enterprise but exempt from taxation according to the tax law.
Non-taxable income: economic benefits that do not belong to the profit-making activities of an enterprise and are items that are not taxable under the law.
The biggest difference is that the expenses formed by the non-taxable income used for expenses or the depreciation and amortization due to the formation of assets are not allowed to be deducted before tax; but the tax-exempt income is.
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Q:
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Which type of income do financial resources apply?
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A:
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Fiscal funds are applicable to non-taxable income.
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Q:
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What are the conditions to be met for fiscal funds to be treated as non-taxable income?
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A:
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The following conditions need to be met at the same time in order to be treated as non-taxable income and at the same time deducted from the total income when calculating taxable income.
The enterprise can provide the fund allocation document stipulating the special purpose of the fund.
The financial department or other government department allocating the funds has special fund management methods or specific management requirements for the funds.
The enterprise accounts separately for the funds and the expenses incurred with the funds.
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Q:
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What are the special rules for fiscal funds as non-taxable income?
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A:
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After the enterprise treats the fiscal funds that meet the prescribed conditions as non-taxable income, the part that has not incurred expenditure within 5 years (60 months) and has not been paid back to the financial department or other government departments that allocated the funds shall be included in the total taxable income in the sixth year of obtaining the funds; the expenditure incurred by the fiscal funds included in the total taxable income is allowed to be deducted when calculating the taxable income.
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FAQ
