Viewpoint... The fiscal and tax treatment of corporate donation expenses under the new pneumonia epidemic and the filing of the corporate income tax settlement declaration form.

In the Spring Festival of 2020, the pneumonia epidemic of the new coronavirus infection spread from Wuhan to the whole country. Due to the rapid outbreak and large-scale spread of the epidemic, various industries, including hospitals, have produced a shortage of protective equipment. However, the virus is ruthless and the people of the whole country are united in fighting the epidemic. Recently, many enterprises, social organizations and individuals have made in-kind and cash donations to the Red Cross, foundations, hospitals and patients. Enterprises should carry out reasonable accounting and tax treatment while fulfilling their social responsibility to make donations. This article is based on the announcement on issues related to the revision of the annual tax return of enterprise income tax (No. 41 of 2019), the announcement on donation tax policies related to the prevention and control of pneumonia epidemic caused by novel coronavirus infection (Announcement No. 9 of the State Administration of Taxation of the Ministry of finance, 2020), the announcement on tax collection and administration matters related to the prevention and control of pneumonia epidemic caused by novel coronavirus infection (Announcement No. 4 of the State Administration of Taxation of the the People's Republic of China) in the context of the provisions of the Detailed Rules for the Implementation of the Regulations, the Regulations for the Implementation of the the People's Republic of China Enterprise Income Tax Law, and the Notice of the State Administration of Taxation on the Treatment of Income Tax on the Disposal of Assets by Enterprises (Guo Shui Han [2008] No. 828), for everyone carefully combed the relevant deemed sales, public welfare donations tax policy, case analysis and corporate income tax settlement declaration form how to fill out, the epidemic prevention and control of corporate donations during the fiscal and tax issues involved in the prompt.

1

Policy combing

1. New tax policy under the pneumonia outbreak of the new coronavirus infection:

 

(1) Article 2 of the Announcement on Tax Policies on Donations to Support the Prevention and Control of the Pneumonia Epidemic Infected by Novel Coronavirus (Announcement No. 9 of 2020 of the State Administration of Taxation of the Ministry of Finance), enterprises and individuals are allowed to donate directly to hospitals that undertake the task of epidemic prevention and control items used to deal with the pneumonia epidemic infected by the novel coronavirus, which are allowed to be deducted in full when calculating taxable income. The donor shall handle the pre-tax deduction on the basis of the donation receipt letter issued by the hospital responsible for the prevention and control of the epidemic.

 

Article 3: Units and individual industrial and commercial households will donate free of charge through public welfare social organizations, people's governments at or above the county level and their departments and other state agencies, or directly to hospitals that undertake the task of epidemic prevention and control. Those who are used to deal with the pneumonia epidemic of new coronavirus infection are exempt from value-added tax, consumption tax, urban maintenance and construction tax, education surcharge, and local education surcharge.

 

(2) The term "public welfare social organizations" as mentioned in Article 12 of the Announcement on Matters Relating to Tax Collection and Administration in Support of the Prevention and Control of the Pneumonia Epidemic Infected by Novel Coronavirus (State Administration of Taxation Announcement No. 4 of 2020) and Article 1 of Announcement No. 9 refers to social organizations that have obtained pre-tax deduction qualifications for public welfare donations in accordance with the law. If an enterprise enjoys the full pre-tax deduction policy stipulated in Announcement No. 9, it shall adopt the method of "self-discrimination, declaration and enjoyment, and retention of relevant information for future reference", and fill in the full deduction of donations into the corresponding line of the enterprise income tax return.

 

2. VAT as sales policy:

 

(1) Article 4 of the Rules for the Implementation of the Provisional Regulations on Value Added Tax stipulates that the following acts of units or individual industrial and commercial households shall be regarded as the sale of goods:

 

(I) to deliver the goods to other units or individuals for sale on a commission basis;

(II) sales of consignment goods;

(III) taxpayers who have two or more institutions and implement unified accounting, transfer goods from one institution to other institutions for sale, except where the relevant institutions are located in the same county (city);

(IV) the use of self-produced or commissioned goods for non-VAT taxable items (this clause shall be automatically abolished after the VAT reform);

(V) the use of self-produced or commissioned goods for collective welfare or individual consumption;

(VI) provide goods produced, processed or purchased by commission as investment to other units or individual industrial and commercial households;

The (VII) distributes the goods produced, processed or purchased by commission to the shareholders or investors;

(VIII) give to other units or individuals free of charge the goods produced, processed or purchased on commission.

 

(2) Article 14 of Annex 1 of Caishui [2016] No. 36 stipulates that the following circumstances shall be regarded as sales of services, intangible assets or real estate:

 

(I) units or individual industrial and commercial households provide services to other units or individuals free of charge, except for those used for public welfare or for the public.

(II) unit or individual transfers intangible assets or real estate to other units or individuals without compensation, except for those used for public welfare or for the public.

(III) other circumstances as prescribed by the Ministry of Finance and the State Administration of Taxation.

 

3. Enterprise income tax as sales policy:

 

(1) Article 25 of the Regulations for the Implementation of the Enterprise Income Tax Law, the exchange of non-monetary assets by an enterprise, and the use of goods, property, and services for donation, debt repayment, sponsorship, fund-raising, advertising, samples, employee welfare or profit Distribution and other purposes shall be regarded as the sale of goods, transfer of property or provision of services, unless otherwise stipulated by the finance and taxation authorities under the State Council.

 

(2) Article 2 of the Notice of the State Administration of Taxation on the Treatment of Income Tax on the Disposal of Assets by Enterprises (Guo Shui Han [2008] No. 828), the following circumstances in which an enterprise transfers assets to others, which do not belong to internal disposal of assets because the ownership of the assets has changed, shall be treated as sales to determine income according to regulations:(1) for marketing or sales;(2) for social entertainment;(3) for employee awards or benefits;(4) for dividend distributions;(5) for external donations; and (6) for other purposes that change ownership of assets. Article 3 In the event of the circumstances specified in Article 2 of this Notice, the sales revenue shall be determined according to the external sales price of similar assets of the enterprise in the same period, and the sales revenue may be determined according to the price at the time of purchase.

 

II

"Donation" should be treated as if it were a sale and the method of determining "sales" as if it were a sale.

1. In the case of VAT, sales are determined in the following order:

 

(1) Determined by the average selling price of the same kind of goods in the most recent period of the taxpayer;

(2) Determined at the average sales price of similar goods for other taxpayers in the most recent period;

(3) Determined by the constituent taxable price, the formula for the constituent taxable price: constituent taxable price = cost *(1 cost margin).

 

2. In terms of enterprise income tax, the sales revenue of assets belonging to the enterprise shall be determined according to the external sales price of similar assets of the enterprise in the same period.

3

Typical case analysis, "donation behavior" is treated as the filling of the sales enterprise income tax return.

Case 1 (this case is a case where the donation expenditure for public welfare undertakings through public welfare social organizations is not under this epidemic, which is in line with the Notice of the Ministry of Finance and the State Administration of Taxation on the Relevant Policies for the Pre-tax Carry-forward Deduction of Enterprise Income Tax for Public Welfare Donation Expenditure (Caishui [2018] No. 15) document stipulates that the limit deduction shall be made within 12% of the total annual profit): enterprise A will donate its own non-consumption tax taxable products to a hospital through charity in 2019 at a cost price of $800000 and a market price of $1 million (excluding VAT), assuming that the donation expenditure is within the 12% limit of Enterprise A's total annual profit.

 

1. Accounting treatment:

 

Debit: Non-operating expenses-donation expenses 93

Credit: Inventory 80

Taxes payable-VAT payable (output tax) 13

 

2. Instructions for filling in the income tax return.

 

The first step:

 

Donations of goods can be split into two businesses, namely, selling goods first and then using the proceeds for donations. Therefore, it should be treated as sales first, that is, to determine the "deemed sales income" 1 million yuan and the "deemed sales cost" 800000 yuan, and to increase the taxable income by 200000 yuan in total. Details of Tax Adjustments for Specific Businesses of Deferred Sales and Real Estate Development Enterprises (A105010) are as follows:

 

The second step:

 

"(I) are treated as sales income" in line 2 of the Schedule of Tax Adjustment Items (A105000) ". Fill in the form according to the Schedule of Tax Adjustments for Specific Businesses of Deified Sales and Real Estate Development Enterprises (A105010). The second column "tax amount" is filled in the amount in the first column of the first row of the A105010 form, and the figure in this example is 100. In column 3, "increase amount", fill in the amount in column 2 of row 1 of the A105010. In this example, the number is 100.

 

"(I) are treated as cost of sales" in line 13 of the Schedule of Tax Adjustment Items (A105000) ". Fill in the form according to the Schedule of Tax Adjustments for Specific Businesses of Deified Sales and Real Estate Development Enterprises (A105010). Column 2 "Tax Amount" A105010 the amount in column 1 of line 11 of the form. In this example, the number is 80. Column 4 "Reduction Amount" Fill in the absolute value of column 2 in row 11 of the A105010 form, which is 80 in this example.

 

Step 3:

 

Schedule of Tax Adjustment Items (A105000) Line 30 "(xvii) Other". Fill in the amount of other deduction items that need to be adjusted for tax due to differences between accounting treatment and tax regulations. When an enterprise uses goods, assets and services for donations, advertising and other purposes, after tax adjustment as sales, the amount of tax adjustment required for differences between the accounting treatment of corresponding expenses and tax regulations shall be filled in the Bank. If column 1 ≥ column 2, column 3 "increase amount" shall fill in the amount in column 1-2. If column 1

 

Specifically, in this example, "(17) Other" is filled in as follows: the "carrying amount" in column 1 is 0, the "tax amount" in column 2 is 20, the "increase amount" in column 3 is 0, and the "reduction amount" in column 4 is 20, the absolute value of the amount (-20) in column 1-2. The filling method is as follows:

 

Step 4:

 

The fourth column "tax amount" of the "Schedule of Donation Expenditure and Tax Adjustment" (A105070) = the first column "account amount" is 930000 yuan, which will not result in tax increase or tax reduction. The filling method is as follows:

 

Case 2 (this case is a case of preferential tax policies that are exempted from value-added tax and full deduction before enterprise income tax in accordance with the provisions of document No. 9 of 2020 announced by the State Administration of Taxation): in January 2020, an enterprise directly donated self-produced masks to hospitals undertaking epidemic prevention and control tasks for epidemic prevention and control. The product cost is 800000 yuan, and the market price excluding tax is 1 million yuan.

1. Accounting treatment

Borrowing: Out-of-business expenses-donation expenses 80.

Credit: Inventory 80

2. Instructions for filling in the income tax return.

 

The filling method of the first step to the third step is the same as that of Case 1.

 

Step 5:

However, on the premise that full deduction is allowed, the "tax amount" in column 4 of the Schedule of Donation Expenditure and Tax Adjustment (A105070) = the "account amount" in column 1 is 800000 yuan, which will not result in tax increase or tax reduction. The filling method is as follows:

 

Two common mistakes in daily work

The first type: only the increase in deemed sales revenue, not the reduction in deemed sales costs. The final result is: as sales revenue 100, as sales cost 0, as sales income 100, according to the statutory tax rate of 25% to pay enterprise income tax 25. This type of filling is seen sporadically in practice.

 

The second kind: as sales income 100, as sales cost 80, as sales income 20, according to the statutory tax rate of 25% to pay enterprise income tax is 5, resulting in enterprises to pay more enterprise income tax. This type of filling is the most common method, which often appears in the settlement of income tax or tax audit.

Six

The advantages and disadvantages of "deemed sales" in corporate income tax.

 

The original intention of designing the deemed sales system on income tax should be to plug loopholes, strengthen collection and management and create a level playing field. However, in any case, it should not be understood as simply to increase revenue (more taxes). The view that deemed sales only recognize deemed sales revenue, but not deemed sales costs, will certainly generate income, will certainly generate income tax is wrong, and the view that deemed sales may generate negative income (deemed sales costs will be greater than deemed sales revenue) is also wrong. The income from the deemed sale should be equal to zero and no income tax should arise.

 

From this point of view, it is not only harmless to taxpayers, but also "beneficial" to taxpayers. "Profit" is increasing the deduction base for the taxpayer's "three expenses.

 

Shandong Zhongcheng Qingtai (Jinan) Law Firm is one of the earliest law firms in Shandong Province to provide tax-related legal services. The legal team of the Tax Law Center of the Company's Business Department has served as the annual legal adviser of more than 20 provincial, municipal, district and county tax authorities, providing professional tax-related legal services for a number of large enterprises, successfully resolving a number of tax-related dispute cases, and having rich experience in corporate tax risk prevention and tax planning.