Article 14 When calculating the taxable income amount, an enterprise may not deduct the costs of the investment assets during the period of external investment.

Article 15 In case an enterprise uses or sells its inventories, it is permitted to deduct the costs of the inventories calculated pursuant to the related provisions when calculating the taxable income amount.

Article 16 In case an enterprise transfers an asset, it is permitted to deduct the net value of the asset when calculating the taxable income amount.

Article 17 An enterprise may not offset the losses of its overseas business organs against the profits of its domestic business organs in the consolidated calculation of its enterprise income taxes.

Article 18 The losses suffered by an enterprise during a tax year may be carried forward and made up by the incomes during subsequent years, however, the carry-forward period may not exceed five years.

Article 19 In case a non-resident enterprise obtains incomes as prescribed in Paragraph 3, Article 3 of the present Law, the following approaches shall be adopted in calculation of the taxable income amount:

(1) As regards dividends, bonuses and other equity investment gains, interest, rentals and royalties, the taxable income amount shall be the total income amount;

(2) As regards incomes from transferring property, the taxable income amount shall be the balance of the total income amount minus the net value of the property; and

(3) As regards other incomes, the taxable income amount shall be calculated according to the approaches as mentioned in the preceding two items by analogy.

Article 20 The specific scope and standards of revenues and deductions, as well as the concrete tax treatment methods of assets as prescribed in this Chapter shall be constituted by the financial and tax administrative departments under the State Council.

Article 21 If the enterprise's financial or accounting treatment method does not comply with any tax law or administrative regulation when calculating the taxable income amount, the tax law or administrative regulation shall prevail.

Chapter III Payable Tax Amount

Article 22 The payable tax amount shall be the balance of the taxable income amount multiplied by the applicable tax rate minus the tax amounts deducted and exempted as prescribed in the present Law.

Article 23 In case an enterprise has already paid overseas the enterprise tax for the following incomes, it may deduct it from the payable tax amount of the current period. The limit of tax credit shall be the payable tax amount on such incomes calculated under the present Law. The part exceeding the limit of tax credit may, during the five subsequent years, be offset from the balance of the limit of tax credit of each year minus the tax amount which ought to be offset in the current year:

(1) A resident enterprise's taxable incomes sourced outside the territory of China; and

(2) Taxable incomes obtained outside the territory of China by a non-resident enterprise having organs or establishments inside the territory of China, but having actual connection with such organs or establishments.

Article 24 As regards the dividends, bonuses and other equity investment gains earned outside the territory of China by a resident enterprise from a foreign enterprise which it controls directly or indirectly, the portion of income tax on this income paid outside the territory of China by the foreign enterprise may be treated as the allowable tax credit of the resident enterprise's overseas income tax amount and be deducted within the limit of tax credit as provided for in Article 23 of the present Law.

Chapter IV Preferential Tax Treatments

Article 25 The important industries and projects whose development is supported and encouraged by the state shall enjoy the preferential treatments in enterprise income tax.

Article 26 An enterprise's following incomes shall be tax-free ones:

(1) The interest incomes from treasury bonds;

(2) Dividends, bonuses and other equity investment gains

generated between qualified resident enterprises;

(3) Dividends, bonuses and other equity investment gains which are obtained from a resident enterprise by a non-resident enterprise with organs or establishments inside the territory of China and have actual connection with such organs or establishments; and

(4) Incomes of qualified not-for-profit organizations.

Article 27 As regards the following incomes, the enterprise income tax may be exempted or reduced:

(1) The incomes generated from the engagement in agriculture, forestry, husbandry and fishery;

(2) The incomes generated from investment in and business operations of the important public infrastructure projects supported by the state;

(3) The income generated from the projects of environmental protection as well as energy and water saving and satisfying the related requirements;

(4) The incomes generated from transferring technologies and satisfying the related requirements; and

(5) The income as provided for in Paragraph 3, Article 3 of the present Law.

Article 28 As regards a small meager-profit enterprise satisfying the prescribed conditions, the enterprise income tax shall be levied at a reduced tax rate of 20 percent.

As regards important hi-tech enterprises necessary to be supported by the state, the enterprise income tax shall be levied at the reduced tax rate of 15 percent.

Article 29 The autonomous organ of an autonomous region of ethnic minorities may determine to reduce or exempt the enterprise income tax by enterprises within the afore said autonomous region. In case the decision on deduction or exemption is made by an autonomous prefecture or county, it shall be reported to the people's government of the province, autonomous region, or municipality directly under the Central Government for approval.

Article 30 An enterprise may additionally calculate and deduct the following expenditures in the calculation of the taxable income amount:

(1) The expenditures for researching and developing new technologies, new products and new techniques; and

(2) The wages paid to the disabled employees or other employees encouraged to be hired by the state.

Article 31 In case a startup investment enterprise engages in important startup investments necessary to be supported and encouraged by the state, it may deduct a certain proportion of the investment amount from the taxable income amount.

Article 32 In case an enterprise surely needs to accelerate the depreciation of any fixed asset by virtue of technological progress or for any other reason, it may curtail the term of depreciation or adopt a method for accelerated depreciation.

Article 33 As regards the incomes earned by an enterprise from producing products complying with the industrial policies of the state by comprehensively utilizing resources, the incomes may be downsized in the calculation of the amount of taxable incomes.

Article 34 As regards the amount of an enterprise's investment in purchasing special equipment for protecting environment, saving energy and water, work safety, etc., the tax amount may be deducted at a certain rate.