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March 2017
credits, with corporate income tax (CIT)
waived on donations accounting for up to
12 percent of their profits. This can be rolled
out over a three-year period. If a company
donates US$4 million and their profits are
US$10 million, for example, they wouldn’t
be able to deduct the entire US$4 million for
a single year’s CIT, but would be able to do
so incrementally over three years.
Additionally, overseas companies making gain interest in Chinese bank accounts, but Photo from google.com
donations are entitled to either a reduction any other funding method runs the risk of
or full exemption of China’s import duties seeing the charity closed. Law. Conversely, foreign charities – which
and import VAT. are generally more willing to engage in some
The implementation of the Charity and of the latter areas – will have even less space
Incentives for Charities and NGOs Overseas NGO Laws will therefore see a to work in the Middle Kingdom. In short,
Both the Charity Law and the Overseas NGO clear line drawn between funding available the implementation of the Charity and
Law state that charitable organizations to foreign and domestic charities. Because Overseas NGO Laws is further evidence that
are eligible for tax incentives, but don’t of its restrictions, the new source of funding the Chinese government is crafting its own
specify what exactly these incentives are. that the donation tax incentive creates will be civil society. Foreign charities do not feature
This may be because the laws are new and limited to domestic companies, weakening heavily in its plans.
still due for revision of specific policies, or, overseas charities’ competitiveness and
perhaps likely, that they’re vague to allow ability to operate in the Chinese market. For your information, This article was
for individual assessments rather than a The same can be said for domestic charities first published by China Briefing.
blanket tax reduction. that collaborate with or receive funding
from their foreign counterparts, with such Since its establishment in 1992, Dezan
Qualifying for the Incentives charities often closely monitored for doing Shira & Associates has been guiding
In order for a charity to qualify for these so. foreign clients through Asia’s complex
incentives, they must appoint a trustee, have regulatory environment and assisting
them sign a “charitable trust document” , The two new laws present a mixed bag for them with all aspects of legal, accounting,
and then file it with their local department the future of China’s civil society sector. The tax, internal control, HR, and audit
of the Ministry of Civil Affairs. Failure Charity Law is almost certain to provide a matters. As a full-service consultancy with
to do so would result in both the charity well needed boost to domestic charities operational offices across China, Hong
and companies making donations to that in the country, but, as indicated in its Kong, India, and ASEAN, we are your
charity being ineligible for tax benefits. description of charitable activities, only reliable partner for business expansion in
For donating companies, it is therefore to those engaged in certain areas, such as this region and beyond.
advisable to check that the charity has gone social service provision – a sector where
through these procedures prior to making a civil society is well placed to fill the gap left For inquiries, please email info@dezshira.
donation. by the state’s gradual withdrawal of funding. com. Information about our firm can be
Engagement in other areas, such as political found at: www.dezshira.com.
Methods for Funding Foreign rights, labor rights and religion, would likely
Charities and Future Outlook be seen as harming the “national security”
and “public interest” specified in the Charity
With foreign charities and NGOs prohibited
from both receiving donations in China and
conducting for-profit activities, the means
of funding them is essentially limited to
overseas payments. These payments can
15
credits, with corporate income tax (CIT)
waived on donations accounting for up to
12 percent of their profits. This can be rolled
out over a three-year period. If a company
donates US$4 million and their profits are
US$10 million, for example, they wouldn’t
be able to deduct the entire US$4 million for
a single year’s CIT, but would be able to do
so incrementally over three years.
Additionally, overseas companies making gain interest in Chinese bank accounts, but Photo from google.com
donations are entitled to either a reduction any other funding method runs the risk of
or full exemption of China’s import duties seeing the charity closed. Law. Conversely, foreign charities – which
and import VAT. are generally more willing to engage in some
The implementation of the Charity and of the latter areas – will have even less space
Incentives for Charities and NGOs Overseas NGO Laws will therefore see a to work in the Middle Kingdom. In short,
Both the Charity Law and the Overseas NGO clear line drawn between funding available the implementation of the Charity and
Law state that charitable organizations to foreign and domestic charities. Because Overseas NGO Laws is further evidence that
are eligible for tax incentives, but don’t of its restrictions, the new source of funding the Chinese government is crafting its own
specify what exactly these incentives are. that the donation tax incentive creates will be civil society. Foreign charities do not feature
This may be because the laws are new and limited to domestic companies, weakening heavily in its plans.
still due for revision of specific policies, or, overseas charities’ competitiveness and
perhaps likely, that they’re vague to allow ability to operate in the Chinese market. For your information, This article was
for individual assessments rather than a The same can be said for domestic charities first published by China Briefing.
blanket tax reduction. that collaborate with or receive funding
from their foreign counterparts, with such Since its establishment in 1992, Dezan
Qualifying for the Incentives charities often closely monitored for doing Shira & Associates has been guiding
In order for a charity to qualify for these so. foreign clients through Asia’s complex
incentives, they must appoint a trustee, have regulatory environment and assisting
them sign a “charitable trust document” , The two new laws present a mixed bag for them with all aspects of legal, accounting,
and then file it with their local department the future of China’s civil society sector. The tax, internal control, HR, and audit
of the Ministry of Civil Affairs. Failure Charity Law is almost certain to provide a matters. As a full-service consultancy with
to do so would result in both the charity well needed boost to domestic charities operational offices across China, Hong
and companies making donations to that in the country, but, as indicated in its Kong, India, and ASEAN, we are your
charity being ineligible for tax benefits. description of charitable activities, only reliable partner for business expansion in
For donating companies, it is therefore to those engaged in certain areas, such as this region and beyond.
advisable to check that the charity has gone social service provision – a sector where
through these procedures prior to making a civil society is well placed to fill the gap left For inquiries, please email info@dezshira.
donation. by the state’s gradual withdrawal of funding. com. Information about our firm can be
Engagement in other areas, such as political found at: www.dezshira.com.
Methods for Funding Foreign rights, labor rights and religion, would likely
Charities and Future Outlook be seen as harming the “national security”
and “public interest” specified in the Charity
With foreign charities and NGOs prohibited
from both receiving donations in China and
conducting for-profit activities, the means
of funding them is essentially limited to
overseas payments. These payments can
15
