Source: Ministry of Finance and State Administration of Taxation Announcement No. 43 (2020)

Date: November 27, 2020

In accordance with the “Enterprise Income Tax Law of the People’s Republic of China” and its implementation regulations, the announcement regarding the pre-tax deduction of advertising expenses and business promotion expenses is hereby announced as follows:

1. Advertising expenses and business promotion expenses incurred by cosmetics manufacturing or sales, pharmaceutical manufacturing, and beverage manufacturing (excluding alcohol manufacturing) enterprises that do not exceed 30% of the sales (operating) income of the current year are allowed to be deducted. The excess is allowed to be carried forward for deduction in subsequent tax years.
2. For affiliated enterprises that have signed an agreement on the sharing of advertising and business promotion expenses, the advertising and business promotion expenses incurred by one of the parties that do not exceed the pre-tax deduction limit for sales (business) income of the year can be deducted from the enterprise or Part or all of it will be deducted by the other party according to the apportionment agreement. The other party may exclude the advertising and business promotion expenses attributed to the enterprise in accordance with the above method when calculating the pre-tax deduction limit for the enterprise’s an advertising and business promotion expenses.
3. Tobacco advertising expenses and business promotion expenses of tobacco companies shall not be deducted in calculating the taxable income.
4. This notice shall be implemented from January 1, 2021, to December 31, 2025. The Circular of the Ministry of Finance and the State Administration of Taxation on the Pre-tax Deduction Policies for Advertising Expenses and Business Promotion Expenses (Caishui [2017] No. 41) shall be repealed from January 1, 2021.

Remarks: For the extensive collection of relevant information for reference.