Promulgation Authorities： Ministry of Finance , State Administration of Taxation , the Ministry of Civil Affairs
Release Date： 2020.05.13
Effective Date： 2020.01.01
Doc Number： Announcement [2020] No.27 by the Ministry of Finance, the State Taxation Administration and the Ministry of Civil Affairs
Announcement of Matters relating to Pre-tax Deduction of Public Welfare Donations
Announcement [2020] No.27 by the Ministry of Finance, the State Taxation Administration and the Ministry of Civil Affairs
In order to implement the Law of the People's Republic of China on Corporate Income Tax and its implementing regulations as well as the Individual Income Tax Law of the People's Republic of China and its implementing regulations, matters relating to the pre-tax deduction of public welfare donations are hereby announced as follows:
I. Where enterprises or individuals make donations for public welfare and charitable undertakings that comply with the provisions of the law through state organs such as public welfare social organizations or people's governments at the county level or above, their donation expenditures are allowed to be deducted when the taxable income is calculated in accordance with the provisions of the Tax Law.
II. For the purpose of Paragraph I hereof, "public welfare and charitable undertakings" shall comply with the provisions on the scope of public welfare under Article 3 of the Law of the People's Republic of China on Donations for Public Welfare or the provisions on the scope of charitable activities under Article 3 of the Charity Law of the People's Republic of China.
III. Public welfare social organisations referred to in Paragraph I hereof shall include charities, other social organisations and mass organisations established or registered pursuant to the law, which have obtained pre-tax deduction qualification for public welfare donations pursuant to the stipulated criteria and procedures. The prevailing provisions shall apply to the recognition and administration of the qualification of public-welfare mass organisations for pre-tax deduction of public welfare donations, and this Announcement shall govern the recognition and administration of the qualification of legally registered charities and other social organizations for pre-tax deduction of public welfare donations.
IV. Charities and other social organizations registered with the Ministry of Civil Affairs in accordance with the law (hereinafter collectively referred to as the "social organizations") shall meet the following requirements concurrently to obtain the qualification for pre-tax deduction of public welfare donations:
(I) Satisfy the criteria stipulated in Item (I) to Item (VIII) of Article 52 of the Implementation Regulations for the Corporate Income Tax Law.
(II) A special audited information report for the preceding year shall be submitted as required to the registration administrative authorities by 31 March every year. The report shall include the general information on financial revenue and expenditure and assets and liabilities, donations solicitation, donations received, expenditures for public welfare and charitable undertakings and management expenses (including the proportions specified in Items (III) and (IV) of this Paragraph) and other content.
Where the qualification for pre-tax deduction of public welfare donations is recognized for the first time, special audited information reports for the first two years shall be submitted.
(III) For a social organization qualified for public fundraising, the annual expenditures for public welfare and charity undertakings in the previous two years shall account for at least 70% of the total revenue in the previous year. In calculating such ratio, the average revenue for the previous three years may be used to replace the total revenue for the previous year.
For a social organization without the qualification for public fundraising, its annual expenditures for public welfare and charity undertakings in the previous two years shall account for at least 8% of its net assets at the end of the previous year. When calculating such ratio, the average of the net assets at the end of the previous three years may be used to replace the net assets at the end of the previous year.
(IV) The management expenses paid in each of the first two years of a social organization qualified for public fundraising shall not account for more than 10% of its total expenditures in the current year.
For a social organization without the qualification for public fundraising, the proportion of annual management expenses paid for the previous two years in the total expenses of the current year shall not be higher than 12%.
(V) It has the tax-exempt status of a non-profit organization, and such status is still valid.
(VI) It has not been subject to any administrative penalty (other than a warning) imposed by the registration authority in the previous two years.
(VII) It has not been included in the list of subjects for serious breaches of law and dishonest acts by the registration authorities in the previous two years.
(VIII) The social organization is rated as above 3A (inclusive), and the assessment result is still valid when the qualification for pre-tax deduction of public welfare donations is recognized.
The criteria and scope of expenditures, management expenses and total revenue for public welfare and charity undertakings are subject to the relevant provisions of the Notice of the Ministry of Civil Affairs, the Ministry of Finance and the State Taxation Administration on Promulgation of Provisions on Annual Expenditures and Management Expenses for Charitable Activities Carried out by Charities (Min Fa [2016] No.189) governing expenditures, management expenses and total revenue for charitable activities in the previous year.
A charity newly established or accredited in accordance with the Charity Law of the People's Republic of China is only required to meet the conditions set out in Items (I), (VI) and (VII) herein in the year when it obtains the tax-exempt status as a non-profit organization.
V. The recognition of the qualification for pre-tax deduction of public welfare donations shall be conducted in accordance with the following provisions:
(I) For social organizations registered with the Ministry of Civil Affairs, the Ministry of Civil Affairs shall verify their qualification for pre-tax deduction of public welfare donations in light of their public welfare activities and routine supervision, administration and evaluation, and put forward preliminary opinions. According to the preliminary opinions of the Ministry of Civil Affairs, the Ministry of Finance, the State Taxation Administration and the Ministry of Civil Affairs shall, by reference to the relevant provisions hereof, jointly determine the list of social organizations qualified for pre-tax deduction of public welfare donations and release an announcement.
(II) For social organizations registered with the authorities for civil affairs at or below the provincial level, the finance authorities, taxation authorities and authorities for civil affairs of provinces, autonomous regions, municipalities directly under the Central Government and cities specifically designated in the state plan shall handle the matters with reference to the provisions of Item 1 of this Paragraph.
(III) The objects of which the qualification for pre-tax deduction of public welfare donations is to be recognized include:
1. public welfare social organizations whose qualification for pre-tax deduction of public welfare donations will expire at the end of the current year; and
2. social organizations that have been disqualified for pre-tax deduction of public welfare donations but satisfy the relevant conditions again; and
3. social organizations that have not obtained the qualification for pre-tax deduction of public welfare donations after their registration of establishment.
(IV) By the end of each year, finance authorities, taxation authorities and authorities for civil affairs at or above the provincial level shall, in light of their respective authority, complete the recognition and release of the list of subjects qualified for pre-tax deduction of public welfare donations, and present such subjects and the starting time for their qualification for pre-tax deduction of public welfare donations subject to different review objects as specified in Item (III) of this Paragraph respectively.
VI. The qualification for pre-tax deduction of public welfare donations shall be valid nationwide for three years.
For the first circumstance set out in Item (III) of Paragraph V hereof, the qualification for pre-tax deduction of public welfare donations shall commence from January 1 of the year following the year of the list announcement. Under the second and third circumstances stipulated in Item (III) of Paragraph V hereof, the qualification for pre-tax deduction of charitable donations shall commence from 1 January of the year of announcement.
VII. Any public welfare social organization shall be disqualified for pre-tax deduction of public welfare donations if:
(I) it fails to submit the special information report to the registration authority within the time and as required by this Announcement;
(II) its expenditures for public welfare and charity undertakings in the recent year do not conform to Item (III) of Paragraph IV hereof;
(III) the management fees paid in the latest year are not in compliance with Item 4, Paragraph IV hereof;
(IV) the non-profit organization fails to regain its tax-exempt status within six months of the expiration of such status;
(V) it has been given an administrative punishment by the registration authority (with the exception of warning);
(VI) it has been included by the registration authority into the list of subjects with serious violations and dishonest acts; or
(VII) it is rated lower than 3A or does not have a rating.
VIII. Under any of the following circumstances, a public welfare social organization shall be disqualified for pre-tax deduction of public welfare donations, and its qualification shall not be recognized in the year when it is disqualified or within three years thereafter:
(I) receiving donations in violation of provisions, including imposing conditions that constitute a return on benefits for donors, engaging in profit-making activities in the name of donations, promoting tobacco products or products and matters prohibited by the law by taking advantage of charitable donations, receiving donations not for public welfare purposes or contrary to social morality, etc.;
(II) carrying out activities in violation of the articles of association or using the received donated funds beyond the purposes stipulated in the articles of association; or
(III) designating a specific beneficiary when determining the use and the beneficiary of the donated property, in which the beneficiary has obvious interest relationship with the donor or the management personnel of the public welfare social organization.
IX. Under either of the following circumstances, a public welfare social organization shall be disqualified for pre-tax deduction of public welfare donations and its qualification shall not be re-recognized:
(I) engaging in illegal political activities; or
(II) engaging in or funding activities that endanger national security or public interests.
X. For public welfare social organizations whose qualification for pre-tax deduction of public welfare donations shall be cancelled, finance authorities, taxation authorities and authorities for civil affairs at the provincial level or above shall verify the relevant information and timely announce the list of disqualified social organizations to the public according to their authority. Starting from the month following the month when such announcement is issued, the relevant public welfare social organizations will no longer be qualified for pre-tax deduction of public welfare donations.
XI. When receiving donations, public welfare social organizations, people's governments above the county level and their departments and other state organs shall use public welfare donation receipts printed under supervision of the Ministry of Finance or finance authorities of all provinces, autonomous regions and municipalities directly under the Central Government based on administrative levels, with their seals affixed.
Where enterprises or individuals deduct the expenditures of public welfare donations that meet certain conditions for corporate income tax purpose, they shall keep relevant vouchers for future reference.
XII. When a public welfare social organization is registered with donations for establishment, the donor may deduct the registered capital donations on a pre-tax basis as required, in its final settlement of income tax for the year when the public welfare social organization is qualified for pre-tax deduction of public welfare donations for the first time.
XIII. Unless otherwise provided, when public welfare social organizations, people's governments at county level or above and their departments receive donations from enterprises or individuals, the amount of donations shall be recognized according to the following principles:
(I) for a monetary donation received, the donation amount shall be recognized based on the amount actually received.
(II) for a donation of non- monetary assets received, the amount of the donation shall be recognized based on its fair value. When a donor makes a donation to public welfare social organizations, people's governments at or above the county level and their departments and other state organs, it shall provide a certificate specifying the fair value of the donated non- monetary assets; if it cannot provide such a certificate, the recipient of the donation shall not issue a donation receipt to the donor.
XIV. To facilitate enquiry by taxpayers, finance authorities, taxation authorities and authorities for civil affairs of provincial level and above shall promptly announce on their official websites the list of public welfare social organizations which qualify for pre-tax deduction of public welfare donations.
Enterprises or individuals may inquire about the qualification of pre-tax deduction of charitable donations of social organizations and validity period of such qualification.
XV. This Announcement shall come into force as of January 1, 2020, repealing simultaneously the Notice of the Ministry of Finance, the State Taxation Administration and the Ministry of Civil Affairs on Issues Relating to Pre-tax Deduction of Public Welfare Donations (Cai Shui [2008] No. 160), the Supplementary Notice of the Ministry of Finance, the State Taxation Administration and the Ministry of Civil Affairs on Issues Relating to Pre-tax Deduction of Public Welfare Donations (Cai Shui [2010] No. 45), the Notice of the Ministry of Finance, the State Taxation Administration and the Ministry of Civil Affairs on Adjustments to Examination and Approval for Recognition of Qualification for Pre-tax Deduction of Public Welfare Donations (Cai Shui [2015] No. 141).
For the recognition of social organizations' qualification for pre-tax deduction of public welfare donations for 2019 or previous years that has not completed, finance authorities, taxation authorities and authorities for civil affairs at all levels shall follow the original policies. The recognition and administration of the qualification for pre-tax deduction of public welfare donations in 2020 and the following years shall be subject to this Announcement.
Ministry of Finance
State Taxation Administration
Ministry of Civil Affairs
May 13, 2020
