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Notice of the Ministry of Finance and the State Administration of Taxation on Relevant Policies concerning the Pre-tax Deduction of Enterprise Income Tax on Loan Loss Reserves of Financial Enterprises

Document No.:

Taxes:Tax Incentives

Date of Promulgation:

IssueDepartment:Ministry of Finance,State Administration of Taxation

Date of Implementatio:2015-01-15


Finance offices (bureaus), state taxation bureaus and local taxation bureaus of all provinces, autonomous regions, municipalities directly under the Central Government and cities specifically designated in the state budgetary plan, and the Financial Bureau of Xinjiang Production and Construction Corps.:


In accordance with relevant provisions of the “Enterprise Income Tax Law of the People's Republic of China” and the “Regulations on the Implementation of Enterprise Income Tax Law of the People's Republic of China”, the policies concerning the pre-tax deduction of enterprise income tax on loan loss reserves set aside by policy banks, commercial banks, finance companies, urban and rural credit cooperatives and financial leasing companies, and other financial enterprises are hereby notified as follows:


I. The scope of loan assets whose loan loss reserves are allowed to be withdrawn before the payment of enterprise income tax includes:


(1) Loans (including mortgage, pledge, guarantees and other loans);

(2) Overdraft, discount and credit advances through bank cards (including banker’s acceptance bill advances, L/C advances, guarantee advances, etc.), import/export bill advances, interbank lending, lease financing receivables and other risk assets having the characteristics of loans;

(3) Foreign loans onlent by financial enterprises which assume the responsibility for repayment, including loans from international financial organizations, foreign buyer’s credit, foreign government loans, JBIC untied loans, mixed loans from foreign governments and other assets.


II. The formula for calculating the loan loss reserves of financial enterprises which are granted for pre-tax deduction is as follows:


Amount of loan loss reserves granted for pre-tax deduction = Balance of loan assets of the loan loss reserves which are allowed to be withdrawn by the end of this year × 1% - Balance of loan loss reserves which had been deducted before tax payment by the end of last year


If the amount calculated by the financial enterprises according to the above formula is negative, the amount of taxable income shall be increased after adjustment accordingly.


III. Entrusted loans, agency loans, treasury bond investment, dividends receivable, and reserves turned over to the central bank of financial enterprises, as well as debts and equities, fiscal interest discounts receivable, central bank payment and other assets not taking risks and losses stripped by financial enterprises shall not be used for withdrawing loan loss reserves for pre-tax deduction purposes.


IV. Eligible loan losses of financial enterprises shall be firstly offset against the loan loss reserves which have been deducted before tax payment; the insufficient part can be deducted when calculating the taxable income for the year.


V. As for the provisions concerning the pre-tax deduction of agriculture-related loans of financial enterprises and SME’s loan loss reserves, if the regulations of “Notice of the Ministry of Finance and the State Administration of Taxation on Issues concerning the Pre-tax Deduction of Loss Reserves for Financial Enterprises' Agriculture-related Loans and Loans for Small and Medium-sized Enterprises” (Cai Shui [2015] No.3) have been applied, the provisions of Article I to Article IV of this Notice shall no longer be applicable.


VI. This Notice shall be implemented from January 1, 2014 to December 31, 2018.

Ministry of Finance

State Administration of Taxation


January 15, 2015


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