What are the benefits of individual donations in the end？
I heard that personal donations can deduct part of personal income tax?
Yes
On August 31, 2018, the Fifth Session of the 13th the NPC Standing Committee passed the Decision on Amending the Individual Income Tax Law of People’s Republic of China (PRC), which is the seventh amendment of China’s individual income tax law: the pre-tax deduction ratio of individual charitable donations is directly written into the tax law, and it has risen to the basic provisions of the law.
Specifically, in order to support the development of public welfare undertakings, the third paragraph of Article 6 of the Individual Income Tax Law is implemented. "Individuals donate their income to public welfare charities such as education, poverty alleviation and poverty alleviation, and the part of the donation that does not exceed 30% of the taxable income declared by taxpayers can be deducted from their taxable income; If the State Council stipulates that full pre-tax deduction shall be made for charitable donations, such provisions shall prevail. " On December 30, 2019, the Ministry of Finance and the State Administration of Taxation jointly issued the "Announcement on Individual Income Tax Policies for Donations to Charity", which clarified the rules for pre-tax deduction of personal charitable donations.
In China (in fact, most countries in the world do the same), whether it is an enterprise or an individual, donation expenses must meet three conditions at the same time before they can be deducted before tax.
the purpose is
Support education, poverty alleviation, poverty alleviation and other charitable causes.
Tax law sets deduction ratio
Pre-tax deduction of donation expenses sets the ceiling.
In addition to the full deduction for special projects such as the Red Cross, China generally adopts proportional limit deduction. The pre-tax deduction ratio of personal public welfare donation expenditure is 30% of taxable income, and the excess does not span the new year. For example, donations to the Red Cross in China, compulsory education in rural areas, and the disabled in China can be fully deducted, and the pre-tax deduction of general public welfare donations is 30% of taxable income.
Donations are made through specific intermediaries.
Accepting charitable donations through charities and using them efficiently according to the principle of openness and transparency is not only more conducive to tax management, but also promotes donation behavior to some extent, which is conducive to the establishment of donors’ social responsibility image. Intermediary institutions can be divided into two categories, one is state organs such as people’s governments at or above the county level, and the other is public welfare social organizations with pre-tax deduction qualifications. According to the current mechanism, the financial, taxation and civil affairs departments will jointly issue an announcement to social organizations that meet the conditions of public welfare social groups every year in accordance with the Notice of the Ministry of Finance and the Ministry of Civil Affairs of State Taxation Administration of The People’s Republic of China on Relevant Issues Concerning Pre-tax Deduction of Public Welfare Donations (Caishui [2008] No.160), so as to clarify their eligibility for pre-tax deduction of public welfare donations.
In short, we often say that charitable donations are "tax deductible", in fact, the amount of donations is "taxable income". For example, a table illustrates the problem.
For example, Zhang San’s salary and salary income in 2019 is 400,000 yuan, the deduction fee is 60,000 yuan, the three insurances and one gold are 30,000 yuan, and the special additional deduction is 50,000 yuan. There are no other deductions. In December 2019, Zhang San donated 50,000 yuan to a public welfare project of a foundation (which has obtained the pre-tax deduction qualification for public welfare donations).
Note: No donation: it means that Zhang San has no donation expenditure; Non-public donation: it means that Zhang San donated money, but the institution receiving the donation is not eligible for pre-tax deduction; Charity donation: It means that Zhang San donated money through a charitable organization with pre-tax deduction qualification.
Taxable amount of wage and salary income = (taxable income before donation-allowable public welfare donation expenditure) * tax rate-quick deduction.
If you want to participate in supporting public welfare undertakings, the donation amount will be exempted from paying personal income tax, which can also be understood as equivalent to supporting public welfare undertakings with the money paid by the state tax. But the premise must be donated to a charity with pre-tax deduction qualification. When the donor’s donation behavior meets the three conditions of the pre-tax deduction system for public welfare donations, the donor is allowed to deduct it when calculating income tax, and the state participates in public welfare distribution with tax; On the contrary, it is equivalent to the donor donating with after-tax income. In this way, donors are guided to donate to public welfare social groups that are relatively standardized and qualified for pre-tax deduction of public welfare donations.
(1) Where donations are made to the China Red Cross Foundation, we will issue a special receipt for donations under the unified supervision of the Ministry of Finance to the donors, and the donors will enjoy tax incentives according to relevant national policies;
(2) Donations of more than 10,000 yuan (inclusive) shall be awarded by the China Red Cross Foundation;
(3) Donation of more than 100,000 yuan (inclusive) will be awarded by China Red Cross Foundation;
(4) Donation ceremonies and press conferences can be arranged for donations of more than 1 million yuan (inclusive);
(5) According to the number of donations and the relevant regulations of China Red Cross, the leaders of China Red Cross or China Red Cross Foundation can award the China Red Cross Medal, China Red Cross Charity Medal and China Red Cross Humanitarian Service Medal to the donated enterprises or individuals;
(6) Donations used to support the Red Cross cause, the part of the enterprise within 12% of the total annual profit can be deducted when calculating the taxable income; Individuals are allowed to deduct in full when calculating personal income tax.
(Source: China Red Cross Foundation WeChat WeChat official account)
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