China Clarifies Tax Credit Policy On Foreign Corporate Income
Tuesday, February 16, 2010
China's Ministry of Finance and the State Administration of Taxation (SAT) has
issued a Circular to clarify issues concerning tax credits on overseas incomes
The Circular, related to deduction of overseas income taxes for the current
period, sets forth the specific method for determining the amount of actually
allowable overseas income tax as well as upper limits for tax credit by country
for the current period, SAT announced on February 11.
According to the Circular, when enterprises are unable to calculate the exact
amount of actually allowable overseas income tax by country or region, the taxes
paid by the enterprise in the corresponding countries or regions cannot be deducted
or exempted from the payable tax of enterprises in China.
The Circular further clarifies that such foreign taxes cannot be carried forward
to subsequent years for deduction and exemption.