Deduction of Welfare Fee before Tax

Date:  2017-04-28    Autor:  ECOIVS Ruide Marketing Team

Employee welfare fee in the daily operation of eachenterprise are inevitable and varied, such as the traffic, housing subsidies tostaff, travelling expenses, organizing company meal at festivals, distributegifts and so on. In such circumstances, whether this kind of welfare fee can bededucted before the enterprise income tax? What criteria should be deductedbefore tax? Here, we give some examples to illustrate.

A.   Case 1, the cost of the annual year-end dinner.

Accordingto the Circular of the State Administration of Taxation on the Deduction ofEnterprise Salary Salaries and Employee Benefits (Guo Shui Han [2009] No. 3),the expenses of enterprise employees stipulated in Article 40 of theImplementing Regulations include: Life, housing, transportation and other subsidiesand non-monetary benefits issued. For the text did not list the cost of projects,such as the annual dinner we mentioned earlier, if the accrual principle showsbeing reasonable and legitimate it, project cost can be deducted as staffwelfare fee before tax.

B.   Case 2, the cost of company travel.

Here,the financial distinction between wages and salaries and staff welfareexpenditure. According to the State Administration of Taxation [2009] No. 3document: "Implementation Regulations," Article 34 of the "reasonablewages and salaries" refers to the enterprises in accordance with theshareholders' general meeting, board of directors, remuneration committee orthe relevant management agencies to develop wage and salary system Stipulatesthe wages and salaries actually paid to the employees. "If the companyorganizes traveling for employees in accordance with the above provisions onwages and salaries, and the amount is reasonable, it shall be deducted as a partof salary cost and deducted before tax, such as arranging excellent staff travelprograms. For the arrangements for all-staff travel for example for outings, soit should be treated as a part of staff welfare fee deduction before tax. If theactivity is part of trade union activities and represents trade unionexpenditure, they should be in accordance with the provisions of trade unionfunds deducted before tax payments.

C.   Case 3, the enterprise arrangements for high quality customer travel costs.

The"Enterprise Income Tax Law" provides that if the actual occurrence ofthe enterprise and income-related expenses are reasonable, it is permitted tocalculate an amount deduced from taxable income. Therefore, enterprise travelexpenses occuring due to production and business needs can be included inbusiness hospitality deductions in accordance with the provisions before tax.

D.   Case 4, buying commercial insurance for employees.
Many companies will provide thecompany executives with commercial insurance as a welfare, here the financialsshould pay attention that in accordance with the provisions: in addition toenterprises in accordance with relevant provisions of the state for specialtypes of workers to pay personal safety insurance premiums and the StateCouncil, the tax department, tax authorities can deduct other businessInsurance premiums, the enterprise for investors or workers to pay thecommercial insurance premium cannot be deductible before tax.
As can be seenfrom above examples, which can be deducted before tax, in addition to theprovisions of the National Tax Code [2009] No. 3, if it is indeed for theenterprise all belong to the welfare of the welfare expenses, and In accordancewith the "Enterprise Income Tax Law" and its implementation of theprovisions of the accrual principle, and in line with the before tax deductionof legality, rationality, authenticity, relevance and certainty requirements, allthese can be used as employee benefits in accordance with the provisions of thetax. However, the welfare fee is not a basket for all expenses, not all staffexpenses can be deducted in the welfare fee, such as catering enterprises forthe front desk staff with the work costs, because the production and businessneeds for the enterprise, so it should be as cost, not as welfare expense.

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