Construction Enterprises: Yes! This expense can be deducted before tax


Policy basis: 1

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According to Article 2 of the notice of the State Administration of Taxation on the collection and management of personal income tax of construction and installation workers in cross provincial and non local projects (Notice No

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52 of the State Administration of Taxation in 2015), the construction units in cross provincial and non local projects shall handle the full amount withholding details to the local tax authorities for the wages and salaries paid by the construction workers Declaration

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Where the detailed declaration of full amount withholding is implemented, the tax authorities in the place where the project operation is located shall not approve the collection of individual income tax

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Interpretation of Notice No

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52 of 2015 issued by the State Administration of Taxation: the competent tax authorities of the place where the project operation is located and the place where the withholding unit is located are required to strengthen information transmission, communication and coordination, avoid repeated taxation, and earnestly safeguard the rights and interests of taxpayers

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2

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Article 6 of the notice of the State Administration of Taxation on printing and distributing the Interim Measures for the administration of the collection of individual income tax in the construction and installation industry (GSF [1996] No

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127) stipulates that the units and individuals engaged in the construction and installation industry shall set up accounting books, improve the financial system, and conduct accurate and complete accounting

.

For units and individuals that have not set up accounting books, or cannot carry out accurate and complete accounting, the competent tax authorities may, according to the project scale, project contract (agreement) price and project completion progress, determine their taxable income or taxable amount, and levy taxes accordingly

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The specific verification measures shall be formulated by the tax authorities at or above the county level

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3

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Article 8 of the enterprise income tax law of the people’s Republic of China stipulates that the reasonable expenses actually incurred by an enterprise in connection with the income obtained, including costs, expenses, taxes, losses and other expenses, are allowed to be deducted when calculating the taxable income

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4

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Article 31 of the regulations on the implementation of the enterprise income tax law of the people’s Republic of China stipulates that the tax mentioned in Article 8 of the enterprise income tax law refers to all taxes and surcharges incurred by the enterprise except for the enterprise income tax and the value-added tax allowed to be deducted

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5

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According to Article 4 of the notice of the State Administration of Taxation on the calculation method of individual income tax for employers to bear part of the annual one-time bonus tax for employees (Notice No

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28 of 2011 of the State Administration of Taxation), the individual income tax borne by employers for employees shall be a part of individual wages and salaries

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If it is separately listed as enterprise management fee, it shall not be deducted before tax when calculating enterprise income tax

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Practical analysis of the first situation: the tax authorities in the place where the project operation is located shall apply for the detailed declaration of full amount withholding of all staff, and the tax authorities in the place where the project operation is located shall not approve the collection of individual income tax

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The trans provincial and non local construction units shall declare to the local tax authorities for full amount withholding of the wages and salaries paid by the construction workers, and the local tax authorities shall not approve the collection of individual income tax

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There is no difference between tax treatment and normal salary

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[reminder] as far as possible, according to the requirements of local documents, we should provide “detailed declaration of full amount withholding for all staff” and “no individual income tax shall be collected”

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The second situation: if the tax authorities in the place where the project operation is located have not handled the detailed declaration of full amount withholding of all the staff, the tax authorities in the place where the project operation is located shall check and approve the collection of individual income tax (according to the project scale, project contract (agreement) price, project completion progress, etc., the taxable income or taxable amount shall be determined and taxed) 1、 Repeated tax 1

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The tax authorities in the place where the project operation is carried out check and approve the collection of individual income tax: there is no specific list of individuals, that is, the individual income tax that cannot be offset against the wages and salaries of the project operators

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In practice, whose tax should be paid? What’s the tax credit? How to declare? There is no way to operate

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2

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The income from wages and salaries of engineering workers shall be fully withheld from the local tax authorities

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This is the interpretation of Notice No

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52 of 2015 issued by the State Administration of Taxation to “avoid double taxation and effectively safeguard the rights and interests of taxpayers”

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2、 Whether the individual income tax collected can be deducted before the enterprise income tax can be verified

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The reasons are as follows: 1

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The part of personal income tax collected is not the part of personal burden (this is very important)

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Because there is no specific individual (it is not the individual income tax levied according to the individual income, but the income verified according to the project scale, project contract (agreement) price and project completion progress), the individual income tax borne by the enterprise is different from the individual income tax withheld as a taxpayer according to the withholding method

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[example] Article 4 of the announcement of the Provincial Local Taxation Bureau on issues related to the collection and administration of individual income tax in construction and installation industry (Announcement No

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3 of Hubei Local Taxation Bureau in 2015) and the announcement of Hubei provincial taxation bureau of the State Administration of Taxation on Amending Some Tax normative documents (Announcement No

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4 of Hubei provincial taxation bureau of the State Administration of Taxation in 2018) is: to come to Hubei from other provinces and engage in construction in Hubei Province If the construction and installation enterprises meet the conditions for verification and collection, the individual income tax shall be levied at the rate of 0.5% of their operating income

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Personal income tax is not levied on the basis of personal income, and it is not personal income tax of an individual as a taxpayer

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[reminder] the individual income tax approved by construction enterprises is a bit in violation of the individual income tax law

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2

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The regulations on the implementation of the enterprise income tax law stipulates that the tax that can be deducted before tax refers to all taxes and surcharges incurred by enterprises except for the enterprise income tax and the value-added tax that can be deducted

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The part of individual income tax approved to be collected belongs to “all taxes and surcharges incurred by enterprises except for enterprise income tax and value-added tax allowed to be deducted.” —————

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