During the period from 1 January 2011 to 31 December 2013, reserve provided at 1% of risky loan assets listed in a notice issued by SAT and actual loss which is recognized according to tax allowed conditions are deductible before income tax.
Lee & Lee Associates Comments: The above notice does not clarify the issue that whether loan loss recognized shall be submitted to tax authority for approval before deducting before tax. To avoid taxation risk, taxpayers need consult tax authority to clarify the treatment when handling such issue in practice.
Relevant Rule: ‘Notice of the Ministry of Finance and the State Administration of Taxation on Pre-tax Deduction Policies for Financial Enterprises’ Loss Provisions’, Cai Shui [2012], No. 5
