Notice of the Ministry of Finance and the State Administration of Taxation on Issues concerning Improving the Tax Credit Policy for Overseas Income of Enterprises

• Document Number：No. 84 [2017] of the Ministry of Finance
• Area of Law： Taxation
• Level of Authority： Departmental Regulatory Documents
• Date issued：12-28-2017
• Effective Date：01-01-2017
• Status： Effective
• Issuing Authority： Ministry of Finance State Administration of Taxation

Notice of the Ministry of Finance and the State Administration of Taxation on Issues concerning Improving the Tax Credit Policy for Overseas Income of Enterprises
(No. 84 [2017] of the Ministry of Finance)
The public finance departments (bureaus), state taxation bureaus, and local taxation bureaus of all provinces, autonomous regions, municipalities directly under the Central Government, and cities under separate state planning; the Financial Bureau of Xinjiang Production and Construction Corps
In accordance with the relevant provisions of the Enterprise Income Tax Law of the People's Republic of China and the Regulation on the Implementation thereof as well as the Notice of the Ministry of Finance and the State Administration of Taxation on Issues concerning Tax Credits for Overseas Income of Enterprises (No. 125 [2009], MOF), you are hereby notified of the issues concerning improving the tax credit policy for overseas income of enterprises as follows:
I. An enterprise may choose to respectively calculate its taxable income from abroad by country (region) (i.e. “by country (region) and not by item”) or calculate the total amount of its taxable income from abroad not by country (region) (i.e. “not by country (region) and not by item”), and respectively calculate the creditable amount of overseas income tax and the tax credit limit according to the tax rate as specified in Article 8 of the Document No. 125 [2009] of the Ministry of Finance. Once adopting any of the said methods, the enterprise may not change the method within five years.
When an enterprise chooses to calculate the creditable amount of overseas income tax and the tax credit limit in a method different from that in the previous year (hereinafter referred to as the “new method”), the enterprise's remaining creditable amount from previous years under the Document No. 125 [2009] of the Ministry of Finance may be carried forward into the remaining years of carryover specified in the tax law within the tax credit limit as calculated in the new method.
II. For the dividend income obtained from abroad by an enterprise, when the creditable amount of income tax on this enterprise's overseas dividend income and the tax credit limit are calculated as required, the foreign enterprise in which the enterprise directly or indirectly holds 20% or more of the equity shall be limited to any of the following foreign enterprises at five levels as determined in the shareholding manner specified in Article 6 of the Document No. 125 [2009] of the Ministry of Finance:
Level 1: a foreign enterprise in which 20% or more of equity is directly held by the enterprise; and
Level 2 to Level 5: a foreign enterprise in which a single foreign enterprise at the next higher level directly holds 20% or more of the equity and in which the enterprise directly holds 20% or more of the equity or indirectly holds a total of 20% or more of the equity through one or more foreign enterprises meeting the shareholding manner prescribed in Article 6 of the Document No. 125 [2009] of the Ministry of Finance.
III. Other matters concerning tax credits for overseas income of enterprises shall be governed by the relevant provisions of the Document No. 125 [2009] of the Ministry of Finance.
IV. This Notice shall come into force on January 1, 2017.
Ministry of Finance
State Administration of Taxation
December 28, 2017