The massive May 12, 2008 Wenchuan earthquake caused heavy property damage and saddening losses of life in the Chinese Providences of Sichuan, Shanxi, and Gansu. In order to support the earthquake relief and reconstruction effort, the Ministry of Finance and State Administration of Taxation has implemented post disaster tax deductions and exemptions. These relief measures impact affected individuals or enterprises, and also donations toward the relief effort. The most significant tax relief measures were announced in the “Notice on Implementing the Earthquake Relief and Reconstruction Tax Policies”(Notice 62). The taxes covered in the Notice included: enterprise income tax, individual income tax, house property tax, resource tax, stamp tax, urban land use tax, vehicle and vessel use tax, import tax.

By Zhang Yu, Wang Xiujuan, Chengdu Office of King & Wood, FDI


Notice 62 offers tax relief on losses caused by the earthquake, which may be offset against taxable gross income and deductions may be taken for the enterprise income tax, individual income tax, house property tax, resource tax, stamp tax, urban land use tax, vehicle and vessel use tax. For donated goods and money, if the donation is made by overseas organizations or individuals, all import taxes and consumption taxes on imported commodities may be exempted. In the case of domestic enterprises donating, then deductions may be taken against the enterprise’s taxable gross income subject to the amount does not exceed 12% of its annual profit. Tax authorities may decide between two options for donations: Individual donations are either fully deductible from one’s individual income tax or for up to 30% of one’s annual taxable income may be deducted. For reconstruction, individuals may deduct the stamp tax on house purchases, property tax for house repairs and individual income tax as against remedy fund payments.

Notice 62 also authorizes local governments at the provincial, autonomous region and municipal level to determine the tax relief period and scope of deduction on a number of taxes, thus enabling local governments in disaster areas to implement their own tax reduction schemes based on local conditions. It is worth noting that all of the mentioned tax relief measures are still within the scope of normal deductions readily provided by current law. Based on the previous experiences in dealing with natural disaster relief and reconstruction, the Ministry of Finance and State Administration of Taxation will also likely implement further special tax relief policies specifically addressing the Wenchuan Earthquake, thereby providing more favourable tax policies such as a higher percentage or full deduction on enterprise income tax for enterprises donating in large amounts; and land value-added tax for those construction enterprises engaged in reconstruction work.







作者:张宇、王秀娟 ,金杜律师事务所四川分所, 公司组 外商投资部