Individual and Corporate Income Tax Deductions in China (2025)

Individual Income Tax Deductions (Verify with Tax Authorities):

• Charitable Donations: Donations to approved charitable organizations may be deductible, but there are limits.
  The specific percentage and any limitations should be confirmed with the tax authorities.
  The 30% you mentioned may be outdated.
• Royalties Income Deduction: A deduction may be available for income from royalties.
  The specific percentage or calculation method should be verified with the tax authorities.
  
• Rental Income Deductions: Deductions are allowed for expenses related to rental income.
  The specific rules and limitations should be verified with the tax authorities.
  
• Natural Disaster Relief: Deductions may be available for losses suffered due to natural disasters.
  The specific conditions and limitations should be verified with the tax authorities.
• Disability, Widows/Widowers, and Orphans Relief: Deductions or allowances may be available for individuals with disabilities, widows/widowers, and orphans.
  The specific amounts and eligibility criteria should be verified with the tax authorities.
  
• Medical Expenses: Deductions may be available for certain medical expenses.
  The specific rules, limitations, and any applicable cap should be verified with the tax authorities.
• Mortgage Interest: Deductions may be available for mortgage interest payments.
  The specific rules, limitations, and any applicable cap (such as the CNY 1,000 per month you mentioned) should be verified with the tax authorities.

Corporate Income Tax Deductions (Verify with Tax Authorities):

• Loss Carryforward: Losses can generally be carried forward for a specified period (typically 5 years).
  There is no carryback of losses.
• Consolidated Returns: Consolidated tax returns are not permitted in China.
  Each legal entity must file its own separate tax return.
• Bad Debts: Provisions for bad debts may be deductible up to a certain percentage of outstanding loans.
  The specific percentage and conditions should be verified with the tax authorities.
• Financing Expenses: Interest expenses incurred to generate income are generally deductible.
  However, interest expenses on related-party loans may be restricted if the debt-to-equity ratio exceeds a certain limit.
  The specific ratio (e.g., 2:1 for general companies, 5:1 for financial companies) should be confirmed with the tax authorities.
• Related Party Transactions: Transactions between related parties must be conducted at arm's length.
  The tax authorities scrutinize related party transactions to ensure they are conducted at market prices.
• Entertainment Expenses: A portion of entertainment expenses may be deductible, but there are limitations.
  The specific percentage and any limitations should be verified with the tax authorities.
• Charitable Donations: Donations to approved charitable organizations may be deductible up to a certain percentage of income.
  The specific percentage should be confirmed with the tax authorities.
• Advertising Expenses: A portion of advertising expenses may be deductible.
  The specific percentage or any limitations should be verified with the tax authorities.
• Start-Up Expenses: Start-up expenses are typically fully deductible in the first year of operation.
• Depreciation (Capital Cost Allowance): Depreciation is typically calculated using the straight-line method.
  Accelerated depreciation may be allowed for certain assets or in specific circumstances, such as for foreign investment companies or companies engaged in oil prospecting.
  The specific depreciation rates and useful lives of assets should be verified with the tax authorities.
  
• Research and Development (R&D) Expenses: Additional deductions or incentives may be available for R&D expenses.
  The specific rules and any additional deduction percentages should be verified with the tax authorities.

Key Updates and Considerations:

• Tax Laws are Subject to Change: Chinese tax laws and regulations are subject to frequent updates and amendments
  It is crucial to verify the latest information with a qualified tax advisor or by consulting official Chinese tax sources.
• Professional Advice: Tax regulations in China can be complex.
  It is highly recommended to seek professional advice from a tax specialist experienced in Chinese tax law for specific guidance on your situation.
• Documentation: Maintain proper documentation to support any claimed deductions.