New policies on tax exemptions for charities have been announced by the Chinese authorities. The “Announcement on Pre-tax Deductions for Charitable Donations” (hereinafter referred to as the “Announcement”), jointly released by the Ministry of Finance, the State Administration of Taxation, and the Ministry of Civil Affairs, was announced on may 21. At the same time, the three regulations on pre-tax deductions for charitable donations (hereinafter referred to as the “old regulations”) issued in 2008, 2010 and 2015 were abolished.
Below are the ten main points of the new regulation:
1 Eligible charitable organizations can obtain the pre-tax deduction qualifications in the year of establishment or certification;
2 The validity period of the pre-tax deduction qualification is changed from one to three years, valid nationwide;
3. The list of pre-tax deduction qualifications must be announced promptly, for the current year or the following year;
4 The tax exemption qualification is the prerequisite for obtaining the pre-tax deduction qualification, and the two qualifications are linked;
5 A “social organizations evaluation” is a must and the level must be 3A or above;
6 Provisions for public welfare expenditures and management fees are adjusted with reference to the “Charity Law” and supporting documents;
7 The registered capital can be deducted for the same year when the institution obtains the pre-tax deduction qualification;
8 The donation amount for non-monetary assets is confirmed based on fair value;
9 The “trust interests” of donors should be protected, and disqualifications from fundraising should be effective from the month following the announcement;
10 Degrees of “violation” should be differentiated, and differentiated measures adopted.