What Is an Exempt Income?

Tax-exempt income refers to income that belongs to the taxable income of an enterprise but is exempted from corporate income tax in accordance with tax laws. ^[1]

Tax-exempt income

In foreign countries, donations are counted as tax exemption or tax refund. In China, donations must be state-owned non-profit organizations or funds recognized or designated by the government for tax exemption. No other private or private organizations or funds duty free.

The following income of non-profit organizations is tax-exempt income:

(1) Income received from donations from other units or individuals;

(2) Except for the financial appropriation stipulated in Article 7 of the "Enterprise Income Tax Law of the People's Republic of China"

Tax-exempt income includes:

(1) Interest income from government bonds. Treasury bonds include various treasury bills, special treasury bonds, and preserving public bonds issued by the Ministry of Finance. National key construction bonds issued by the former State Planning Commission, financial bonds issued by the People's Bank of China and various corporate bonds, etc., are not included in the scope of national debt. To encourage taxpayers to actively purchase government bonds, the tax law stipulates that interest income from taxpayers' purchases of government bonds is not included in taxable income and is not subject to corporate income tax.

(2) There is a reduced or refundable turnover tax for designated purposes. The tax law stipulates that the turnover tax (including immediate reimbursement, first reimbursement, and later rebate, etc.) of enterprises that are deducted or refunded by the State Council, the Ministry of Finance, and the State Administration of Taxation shall not be included in taxable income for designated purposes. The other reductions or refunds of turnover tax shall be included in the taxable income amount and the enterprise income tax shall be calculated. Income tax shall be levied on direct deductions and rebates, which shall be incorporated into the income of the enterprise for the year; income tax shall be levied on the income of the year in which the enterprise actually received the tax refund or refund, if the tax is first levied before the tax is refunded.

(3) Subsidy items not included in profit or loss. According to the tax law, the state subsidy income and other subsidy income obtained by enterprises may be deducted from the calculation of taxable income if the State Council, the Ministry of Finance, or the State Administration of Taxation does not count it as profit or loss. The subsidy income other than that shall be incorporated into the taxable income of the year in which the enterprise actually receives the subsidy income, and the enterprise income tax shall be calculated.

(4) Various funds and fees included in the fiscal budget or special fiscal account management. All kinds of internal and external funds (funds, surcharges, and fees) collected by enterprises are approved by the State Council or the Ministry of Finance and are included in the special fiscal account of the budget at the same level or extra-budgetary funds. Included in taxable income.

The various fees collected by the enterprise are subject to the approval of the State Council or the Ministry of Finance in conjunction with the relevant departments and the provincial people's government, and are included in the special fiscal account of the budget at the same level or extra-budgetary funds in accordance with regulations. Collect corporate income tax.

(5) Technology transfer income. Income tax is temporarily exempted on technical service income obtained by scientific research units and colleges and universities serving various industries, including technical results transfer, technical training, technical consulting, technical services, and technical contracting.

Enterprises and public institutions that carry out technology transfer and technology consulting related technology transfer, technology services, and technology training in the process of technology transfer, the annual net income of less than 300,000 yuan, temporarily exempted from income tax; 300,000 yuan Part of the income tax.

(6) The benefits of treating "waste residue, waste gas, and waste water".

(7) Tax exemptions for public institutions and social organizations as stipulated by the State Council, the Ministry of Finance, and the State Administration of Taxation. It mainly includes: the extra-budgetary funds managed by the special fiscal account are not turned over with the approval of the Ministry of Finance; the special subsidy income obtained by the institution for the development of the institution from the competent department and the higher-level unit; the after-tax profit of the institution from the independent accounting operating unit Income from social organizations; income from after-tax profits of operating units at all levels obtained by social organizations; government funding at all levels obtained by social organizations; membership fees collected in accordance with regulations of civil and financial departments at and above the provincial level; Other projects approved by the State Council.

(8) Other tax-exempt income. Refers to the tax-free projects approved by the State Council, the Ministry of Finance, and the State Administration of Taxation in addition to the above.