What types of industry are included in the Ministry of Finance and the State Administration of Taxation issued Caishui [2009] No. 72 ("Circular 72") to raise the deductible cap of the expenses for advertising and promotion up to 30%?
Q1: What types of industry are included in the Ministry of Finance and the State Administration of Taxation issued Caishui [2009] No. 72 ("Circular 72") to raise the deductible cap of the expenses for advertising and promotion up to 30%?
A1: Cosmetics, pharmaceutical and non-alcoholic beverage manufacturing.
Q2: What are the key points and differences between Circular 72 and Circular 48?
A2: The key points of the Circular 48 are listing as follows:
1. The deduction cap remains the same at 30% of revenue for cosmetics, pharmaceutical and non-alcoholic beverage manufacturing, but now also includes cosmetics sales.
2. An enterprise which has an A&P expense sharing agreement with a related enterprise is allowed to claim deduction for its share of the expenses up to the 30% deduction cap.
3. An enterprise can allocate a portion or all of its deductible A&P expenses to a related enterprise, whereby the related enterprise can claim the full amount allocated as deductible expenses, while still being able to use its own full deductible cap amount. This requires an expense allocation agreement between the parties.
4. Advertising and Promotion expenses are not deductible at all for tobacco enterprises.
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