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Notice of the Ministry of Finance and the State Administration of Taxation on the Policies and Relevant Management Issues concerning the Pre-tax Deduction of Public Welfare Relief Donations

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© 2007 International Center for Not-for-Profit Law

Notice of the Ministry of Finance and the State Administration of Taxation on the
Policies and Relevant Management Issues concerning the Pre-tax Deduction of
Public Welfare Relief Donations
(No.6 [2007] of the Ministry of Finance January 18, 2007)

The public finance departments (bureaus) and state taxation departments (bureaus) of
all provinces, autonomous regions, municipalities directly under the Central
Government, and cities directly under separate state planning, and the Financial
Bureau of Sinkiang Production and Construction Corps,

In order to further promote the development of social pubic welfare undertakings, the
relevant policies and relevant management issues concerning the pre-tax deduction of
public welfare relief donations are hereby notified as follows:

I. According to the Regulation on the Registration Administration of Social
Associations (No. 250 of the State Council) and the Regulation on the Administration
of Foundations (No. 400 of the State Council), if the relevant provisions are met, and
upon confirmation of the public finance and taxation authorities, the welfare social
associations or foundations established upon approval of the civil affairs
administrative department may accept the public welfare relief donations granted by
the taxpayers, and when calculating and paying the enterprise or individual income
taxes, the pre-tax deduction of such donations is permitted according to current tax
laws, regulation and relevant policies.

The eligibility of donation-based pre-tax deduction for those welfare social
associations or foundations established upon approval of the department of civil
affairs of the State Council shall be confirmed by the Ministry of Finance and the
State Administration of Taxation, and the eligibility of donation-based pre-tax
deduction of those welfare social associations or foundations established upon
approval of the departments of civil affairs of the people’s provincial governments
shall be confirmed by the provincial authorities of public finance and taxation, and be
reported to the Ministry of Finance and the State Administration of Taxation for
archival filing.

The “official organs for accepting public welfare relief donations” refers to the
people’s governments at or above the county level and their departments.

II. A non-profit public welfare social association or foundation that applies for
eligibility of donation-based pre-tax deduction shall meet the following requirements:
(1) It is dedicated to providing services to the general public and does not aim at
making profits;
(2) It has the qualification of a public welfare legal person, and its property
management and use comply with all relevant laws and administrative regulations;

© 2007 International Center for Not-for-Profit Law

(3) All of its assets and increments are owned by the public welfare legal person;
(4) Its proceeds and operational surplus are mainly used for the activities aimed for
the purposes of its creation;
(5) Its surplus can not be attributed to any individual or for-profit organization when it
is terminated or dissolved;
(6) It can not engage in any business activity irrelevant to the public welfare purpose;
(7) It has sound financial and accounting system;
(8) It has the organizational body not aimed at making private profits; and
(9) No donator may participate by any means in the distributions of the assets of this
organization, nor may it/he have ownership to such assets.

III. A non-profit public welfare social association or foundation that applies for
eligibility of donation-based pre-tax deduction shall submit the following materials:
(1) an application on requesting the donation-based pre-tax deduction;
(2) the registration approval document as issued by the department of civil affairs of
the State Council or the provincial people’s government; and
(3) its charter, and the conditions on capital sources and use for the recent years.

IV. Those non-profit public welfare social associations and foundations, as well as the
people’s governments at or above the county level and their departments that have the
eligibility for donation-based pre-tax deductions shall use the public welfare relief
donations they have accepted for the scope prescribed by tax laws or regulations,
namely, for education, civil affairs, other public welfare undertakings, or for the
districts that suffer from natural disasters or the poverty-stricken districts.

V. Those non-profit public welfare social associations and foundations, as well as the
people’s governments at or above the county level and their departments that have the
eligibility for donation-based pre-tax deductions shall, when accepting donations or
transferring donations, separately use the vouchers of public welfare relief donations
as uniformly printed under supervision of the central or provincial public finance
department according to the financial affiliation, and affix their respective special
financial seals; and shall issue receipts if any individual asks for it for his donations.

VI. A taxpayer shall, when declaring the pre-tax deduction of public welfare relief
donations, additionally submit the following materials:
(1) Certification materials on the eligibility for donation-based pre-tax deductions of
the non-profit public welfare social association or foundation that has accepted or
transferred donations;
(2) The receipt of public welfare relief donations as issued by the non-profit public
welfare social association or foundation or the people’s governments at or above the
county level or any of they departments that has the eligibility for donation-based
pre-tax deductions; and
(3) Other materials as required to be submitted by the competent taxation authority.

© 2007 International Center for Not-for-Profit Law

VII. The competent taxation authority shall organize the check of the use of public
welfare relief donations by non-profit public welfare social associations or
foundations, and if finding that any non-profit public welfare social association or
foundation violates its own charter or uses any donations for any purpose other than
those prescribed in its own charter, shall levy the income taxes on the incomes from
donations and other kinds of incomes, and cancel the eligibility of donation-based
pre-tax deduction it has confirmed.

VIII. This Notice shall be implemented as of the date of promulgation.

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