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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 to Small and Medium-sized 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 loss reserves for financial enterprises' agriculture-related loans and loans to small and medium-sized enterprises are hereby notified as follows:


I. According to the “Guidelines on Risk-Based Loan Classification” (Yin Fa [2001] No.416), financial enterprises shall, after the risk-based classification of agriculture-related loans and loans to small and medium-sized enterprises are completed by financial enterprises, the loan loss reserves withdrawn according to the following ratios are allowed to be deducted when calculating the amount of taxable income:


(1) For special-mentioned loans, the withdrawing proportion is 2%;

(2) For substandard loans, the withdrawing proportion is 25%;

(3) For doubtful loans, the withdrawing proportion is 50%;

(4) For loss loans, the withdrawing proportion is 100%


II. The term “agriculture-related loans” as mentioned in this Notice refers to the following loans according to statistics of the “Special Statistical System for Agricultural-related Loans” (Yin Fa [2007] No.246):

(1) Peasant household loans;

(2) Loans to rural enterprises and various organizations.


The term “peasant household loans” refers to all loans granted to farmers by financial enterprises. Determination of peasant household loans shall be based on whether or not the subject of loan commitments belongs to farmers at the time of loan release. Farmers refer to the long-term (more than one year) residents living in the administrative areas of villages and towns (not including Chengguan towns), also including the long-term households living in the administrative villages under the jurisdiction of Chengguan towns and the households without a registered permanent residence and have been living in the local areas for more than 1 year, workers of state-owned farms and rural individual industrial and commercial households. Collective households of organs, organizations, schools, enterprises and institutions of state-owned economy located in the administrative areas of villages and towns (not including Chengguan towns) and within administrative villages under the jurisdiction of Chengguan towns; households, who have registered permanent residence but moved out with the family to make a living for more than 1 year, do not belong to farmers no matter whether their contracted farmlands are kept or not. By taking household as a statistical unit, farmers can be engaged in agricultural production and management, but also can be engaged in non-agricultural production and management.


The term “loans to rural enterprises and various organizations” as mentioned in this Article refers to all kinds of loans granted by financial enterprises to the enterprises and various organizations which are registered in rural areas. The term “rural area” refers to the area outside of urban administrative districts of cities at the prefecture level and above and their municipal towns.


III. The term “loans to small and medium-sized enterprises” refers to the loans given by financial enterprises to enterprises whose both annual sales volume and total assets are not more than RMB 200 million Yuan.


IV. The qualified losses of financial enterprises' agriculture-related loans and loans to small and medium-sized enterprises shall be used to offset against the loan loss reserves which had been deducted before tax payment, and the shortage portion can be deducted with total honesty when calculating the amount of taxable income.


V. 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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