First, how should the loss of cash shortage and deposit asset loss be deducted before enterprise income tax？

(I) How should the loss of cash shortage be deducted before enterprise income tax？

A: Deduction provisions: the balance of the cash shortage checked by the enterprise after deducting the compensation of the responsible person shall be deducted as a cash loss in the calculation of taxable income。

Confirm according to the following evidence materials:

1. Cash inventory sheet confirmed by the cash custodian (including records backdated to the base date);

2. The cash custodian's explanation of the shortage and relevant approval documents;

3. An explanation of the liability identification and compensation for the loss caused by the responsible person's management responsibility;

4. Where criminal offences are involved, relevant materials issued by judicial organs shall be required;

5. Certificate of collection of counterfeit currency issued by financial institution。

(2) How should the loss of deposit-related assets caused by the liquidation of financial institutions be deducted before enterprise income tax？

A: Deduction provisions: The monetary funds deposited by an enterprise into an institution with the statutory deposit-taking function, and the part that cannot be recovered due to the institution's bankruptcy or liquidation according to law, or the government's order to suspend business or close down, etc., shall be deducted as the deposit loss when calculating the taxable income amount。

Confirm according to the following evidence materials:

1. The original credentials of the deposit assets of the enterprise;

2. Legal documents for bankruptcy and liquidation of financial institutions;

3. Information on the distribution of assets remaining after liquidation of financial institutions。

If the financial institution should be liquidated but has not been liquidated for more than three years, the enterprise can recognize the amount as an asset loss, but there should be a certificate of unfinished liquidation issued by the court or the insolvency liquidation administrator。

Second, how should the bad debt losses receivable and prepayments of enterprises be deducted before enterprise income tax？(except loan claims)

A: Deduction provisions: If the receivables and prepayments of an enterprise other than loan claims meet one of the following conditions, the unrecoverable receivables and prepayments recognized after deducting the recoverable amount can be deducted as bad debt losses in the calculation of taxable income:

(1) The debtor is declared bankrupt, closed, dissolved or revoked according to law, or its business license is cancelled or revoked according to law, and its liquidated assets are insufficient for repayment;

(2) The debtor is dead, or has been declared missing or dead according to law, and his property or estate is insufficient to pay off;

(3) the debtor is overdue for more than three years, and there is solid evidence that it is unable to repay the debt;

(4) After reaching a debt restructuring agreement with the debtor or approving the bankruptcy reorganization plan by the court, repayment cannot be made;

(5) It cannot be recovered due to force majeure such as natural disasters or wars;

(6) Other requirements stipulated by the competent financial and tax authorities under The State Council。

Confirm according to the following relevant evidence materials:

1. Contracts, agreements or descriptions of relevant matters;

2. In the case of bankruptcy liquidation of the debtor, a bankruptcy or liquidation announcement by the people's court shall be made;

3. If it is a litigation case, a written judgment or award of a people's court or an arbitration letter of an arbitration institution, or a legal document whose execution has been finalized (intermediate) by a court order, shall be issued;

4. If the debtor ceases to operate, the business license shall be cancelled or revoked by the industrial and commercial department;

5. In the case of the death or disappearance of the debtor, the public security organ or other relevant departments shall certify the death or disappearance of the debtor personally;

6. In the case of debt restructuring, there shall be a description of the debt restructuring agreement and the tax payment of the proceeds of the restructuring of the debtor;

7. Where it is impossible to recover due to force majeure such as natural disaster or war, a statement of the debtor's disaster and a waiver of creditor's rights shall be given。

Third, overdue accounts receivable more than one year, whether the loss can be recognized in the enterprise income tax deduction？

A: An enterprise overdue more than one year, a single amount of no more than 50,000 or no more than 1/10,000 of the total annual income of the enterprise, accounting has been treated as a loss, can be regarded as bad debt losses, but should explain the situation, and issue a special report。

Fourth, overdue accounts receivable for more than three years, whether the loss can be recognized in the enterprise income tax deduction？

Answer: If the receivables overdue for more than three years have been treated as losses in accounting, they can be treated as bad debt losses, but they should explain the situation and issue a special report。

5. How should enterprise inventory losses be deducted before enterprise income tax？

Enterprise inventory losses are divided into three situations, and the deduction provisions and evidence materials are confirmed as follows:

(A) How should the inventory loss of enterprises be deducted before enterprise income tax？

A: Deduction provisions: For the inventory of the enterprise, the balance of the amount of the inventory loss minus the compensation of the responsible person shall be deducted when calculating the taxable income amount。

Confirm according to the following evidence materials:

1. Basis for determining the taxable cost of inventory;

2. The enterprise internal responsibility identification, responsible person compensation explanation and internal approval documents;

3. Inventory sheet;

4. The stock keeper's statement of loss。

(2) How should the loss of inventory damaged, scrapped or deteriorated by an enterprise be deducted before enterprise income tax？

A: Deduction provisions: For the inventory damaged, scrapped or deteriorated by the enterprise, the balance after deducting the salvage value and the compensation of the responsible person shall be deducted at the time of calculating the taxable income amount。

Confirm according to the following evidence materials:

1. The basis for determining the taxable cost of inventory;

2. Description of inventory scrapping, damage, deterioration, salvage value and verification materials within the enterprise;

3. Where compensation is involved, there shall be a description of the compensation;

4. If the amount of the loss is large (refers to accounting for more than 10% of the taxable cost of such assets of the enterprise, or reducing the taxable income of the year, increasing the loss by more than 10%, the same below), there should be professional technical appraisal opinions or special reports issued by legally qualified intermediaries。

(3) How should an enterprise's stolen inventory loss be deducted before enterprise income tax？

A: Deduction provisions: For the stolen inventory of the enterprise, the balance after deducting the insurance claim and the compensation of the responsible person is deducted at the time of calculating the taxable income。

Confirm according to the following evidence materials:

1. The basis for determining the taxable cost of inventory;

2. Records of reports to public security organs;

3. Where the responsible person and the insurance company are involved in compensation, there should be a description of the compensation。

Vi. How should the loss of fixed assets be deducted before enterprise income tax？

The loss of fixed assets of enterprises is divided into three situations, and the deduction provisions and evidence materials are confirmed as follows:

(1) How should the fixed asset loss of an enterprise be deducted before enterprise income tax？

A: Deduction provisions: For the fixed assets of the enterprise, the balance of its net book value after deducting the compensation of the responsible person is deducted when calculating the taxable income amount。

Confirm according to the following evidence materials:

1. Internal responsibility identification and verification data;

2. Fixed assets inventory form;

3. Information on the tax basis of fixed assets;

4. Description of losses and losses of fixed assets;

5. If the amount of loss is large, there should be a professional technical appraisal report or a special report issued by a legally qualified intermediary。

(2) How should the loss of fixed assets damaged or scrapped by an enterprise be deducted before enterprise income tax？

A: Deduction provisions: For the fixed assets damaged or scrapped by the enterprise, the balance of its net book value after deducting the salvage value and the compensation of the responsible person shall be deducted when calculating the taxable income amount。

Confirm according to the following evidence materials:

1. Information on the tax basis of fixed assets;

2. Internal responsibility identification and verification data;

3. Appraisal materials issued by relevant departments within the enterprise;

4. Where liability compensation is involved, there shall be a description of the compensation;

5. Where the amount of loss is large or the fixed assets are damaged or scrapped due to force majeure causes such as natural disasters, there shall be professional technical appraisal opinions or special reports issued by legally qualified intermediaries。

(3) How to deduct the loss of stolen fixed assets before tax？

A: Deduction provisions: For the stolen fixed assets of the enterprise, the balance of its net book value after deducting the compensation of the responsible person shall be deducted when calculating the taxable income amount。

Confirm according to the following evidence materials:

1. Relevant information on tax basis of fixed assets;

2. Public security organs report records, public security organs case filing, case solving and case closing certification materials;

3. Where liability compensation is involved, there shall be an affirmation of liability for compensation and an explanation of the compensation situation。

7. How should enterprise investment losses be deducted before enterprise income tax？

Enterprise investment losses include debt investment losses and equity (equity) investment losses, deduction provisions and evidence materials confirmed as follows:

(A) How should the loss of enterprise debt investment be deducted before enterprise income tax？

A: Deduction provisions: the loss of enterprise creditor's rights investment should be confirmed according to the original proof of investment, contract or agreement, accounting data and other relevant evidence materials。

In case of loss of creditor's rights investment in the following circumstances, relevant evidentiary materials shall also be presented:

1. If the debtor or guarantor is declared bankrupt, closed, dissolved or revoked, has its business license revoked, is missing or is dead, etc., the debtor or the guarantor shall present a certificate of the payment of assets or a certificate of the payment of the estate。Unable to provide proof of settlement of assets or proof of settlement of estate，And the above matters more than three years，Or debt investment (including credit card overdraft and student loans) balance of less than 3 million yuan，The debtor and guarantor shall provide the corresponding bankruptcy, closure, dissolution certificates, revocation documents, cancellation certificates or inquiry certificates of the administrative department for industry and commerce, and recourse records (including judicial recourse, telephone recourse, letter recourse and doorto-door recourse and other original records);

2. Where the debtor has suffered a major natural disaster or accident, and the enterprise has paid off its assets and recovered the guarantor, and fails to recover the creditor's rights, it shall issue a certificate of the debtor's suffering a major natural disaster or accident, a certificate of insurance compensation, a certificate of asset repayment, etc.

3. If the debtor bears legal liability and its assets are insufficient to repay the debts borrowed, and there is no other debt bearer, the debtor shall produce the court ruling certificate and the asset satisfaction certificate;

4. If the debtor and the guarantor cannot repay the debts due, and the enterprise files a lawsuit or arbitration, the people's court shall enforce the debtor and the guarantor, neither the debtor nor the guarantor has any assets to enforce, and the people's court shall issue a people's court ruling to terminate or terminate (suspend) the execution;

5. The debtor and guarantor are unable to pay their debts as they become due，Where, after the enterprise has filed a lawsuit, the lawsuit is rejected, or the people's court refuses to accept or support the case，Or exonerated (or partially exonerated) the debtor by an arbitral award，Claims that cannot be recovered after recovery，A certificate of dismissal of the suit shall be submitted，Or the court will not accept or support the proof，Or an arbitral institution ruling exempting the debtor from liability;

6. For claims that have been approved for cancellation by The State Council for special projects, documents of approval by The State Council or documents approved by relevant departments under The State Council after approval by The State Council shall be provided。

(2) How should an enterprise's equity investment loss be deducted before enterprise income tax？

A: Deduction provisions: If the equity investment of an enterprise meets one of the following conditions, the unrecoverable equity investment recognized after deducting the recoverable amount can be deducted as the equity investment loss in the calculation of taxable income:

1. The investore is declared bankrupt, closed down, dissolved or revoked according to law, or its business license is cancelled or revoked according to law;

2. The investee's financial situation has seriously deteriorated, huge cumulative losses have occurred, the operation has been suspended for more than three consecutive years, and there is no plan to resume business reorganization;

3. It has no control over the investee, the investment term has expired or the investment term has exceeded 10 years, and the investee is insolvent due to three consecutive years of operating losses;

4. The financial situation of the investee has seriously deteriorated, huge losses have been accumulated, and the liquidation has been completed or the liquidation period has exceeded 3 years;

5. Other requirements stipulated by the competent financial and tax authorities under The State Council。

Confirm according to the following relevant evidence materials:

1. Proof of tax basis of equity investment;

2. Bankruptcy announcement and bankruptcy liquidation documents of the invested enterprise;

3. The administrative department for industry and commerce cancels or revokes the business license documents of the invested entity;

4. Decision documents on administrative handling of the invested entity by the relevant government departments;

5. Legal or other documents evidencing the termination of operation and transaction of the invested enterprise;

6. Asset disposal plan, transaction and accounting materials of the invested enterprise;

7. The legal representative, the principal person in charge and the financial person in charge of the enterprise sign and seal the written statement confirming the investment (equity) loss;

8. Accounting data and other relevant evidentiary materials。

Note: The following equity and claims are not deductible as losses before tax:

1. The creditor's right of the enterprise which the debtor or guarantor has the economic ability to repay but fails to repay on time;

2. In violation of the provisions of laws and regulations, evading or suspending the enterprise's creditor's rights in various forms or under various pretexts;

3. Administrative intervention evasive or suspended enterprise creditor's rights;

4. Claims that the enterprise has not recovered from the debtor or guarantor;

5. Claims arising from non-business activities of the enterprise;

6. Other enterprise creditor's rights and equity that should not be written off。

Viii. How should other asset losses be deducted before enterprise income tax？

A: (A) The enterprise will bundle (package) different types of assets，Sell by auction, inquiry, competitive negotiation, bidding and other market methods，The difference between the selling price and the taxable cost，It can be claimed as an asset loss and allowed to be deducted before tax，However, the asset disposal plan, the basis for the pricing of various assets, the description of the sale process, the sale contract or agreement, the transaction and accounting certificate, and the asset tax basis shall be presented。

(B) the normal business of the enterprise due to the internal control system is not sound, improper operation, non-standard, or business innovation but the policy is not clear, do not support the formation of asset losses，The amount to be borne by the enterprise，It can be claimed as an asset loss and allowed to be deducted before tax，However, the cause of loss certification materials or qualitative certification of the business supervision department and special explanation of the loss should be issued。

(3) Losses incurred by enterprises due to criminal cases，The amount to be borne by the enterprise，Or the amount that has not been recovered after more than two years of investigation by public security organs，It can be claimed as an asset loss and allowed to be deducted before tax，However, evidence of the cause of loss, such as the case investigation of the public security organ and the people's procuratorate or the judgment of the people's court, shall be provided。

Policy basis

Notice of the State Administration of Taxation of the Ministry of Finance on the Policy of Pre-Tax Deduction of Enterprise Asset Losses (Finance and Taxation (2009) No. 57)

Announcement of the State Administration of Taxation on the Release of the "Administrative Measures for Pre-Tax Deduction of Income Tax on Enterprise Asset Losses" (Announcement No. 25, 2011 of the State Administration of Taxation)

Article source: China Taxation Magazine, Shaoguan Local Taxation Bureau, Guangdong Local Taxation Bureau