From the perspective of relevant laws and tax policies, the author discusses how to properly handle public welfare donations related to the novel coronavirus pneumonia epidemic in Wuhan.

In previous years, on the seventh day of the Lunar New Year, many people experienced a great migration, returning to work with lingering pleasure, a bit of fatigue, and perhaps a slightly plumper physique. However, on the seventh day of the Lunar New Year in 2020, the streets are still quiet, with only a few pedestrians wearing masks. Most people are responding to the government's call to stay at home and contribute to the country!

During the Spring Festival of 2020, the novel coronavirus pneumonia epidemic is raging. Although medical personnel and supplies urgently allocated by the state are pouring into Wuhan and Hubei, the key areas of the epidemic, from all directions, front-line supplies are still in short supply, especially protective clothing, masks and other equipment are in short supply. Medical institutions in Wuhan and other cities in Hubei have no choice but to publicly seek assistance from the society, hoping to receive donations and support from all walks of life.

The pneumonia epidemic caused by the novel coronavirus in Wuhan and many other places across the country has touched the hearts of people across the country. In recent days, the enthusiasm for civil love donations has been high, from Internet giants such as Ali and Tencent to cooperative farmers who grow Chinese cabbage, enterprises that produce urgently needed materials, e-commerce platforms, multinational companies, overseas business tycoons, domestic Internet celebrities, stars, and more ordinary people. At present, everyone is actively participating in the donation behavior to fight the epidemic, which is admirable!

However, I have also heard some irrational voices. For example, some netizens suggested that they do not trust the government's Red Society and should donate directly to hospitals or even individual patients. As a legal and financial worker, a rational voice is needed at all times. If we ignore everything because of the emergency, the whole society will be in chaos. We understand the mood of participating in the rescue, but there are actually legal and compliant paths. This is not only being responsible for our own behavior, but also being responsible for the donation object, and it is the most powerful support for fighting the epidemic! Below, the author will discuss how to better handle relevant public welfare donation matters from the perspective of relevant laws and tax policies.

On January 26, the Ministry of Civil Affairs issued the "Announcement on Mobilizing Charitable Forces to Participate in the Prevention and Control of Pneumonia Epidemic of Novel Coronavirus Infection in Accordance with the Law" (Announcement No. 476 of the Ministry of Civil Affairs, hereinafter referred to as Announcement No. 467), which includes: "The funds and materials raised by charitable organizations for the prevention and control of the epidemic in Wuhan City, Hubei Province, shall be received by the Red Cross Society of Hubei Province, the Charity Federation of Hubei Province, the Youth Development Foundation of Hubei Province, the Charity Federation of Wuhan City, and the Red Cross Society of Wuhan City. Except for designated donations, they shall in principle be subject to the unified allocation of the epidemic prevention and control headquarters of novel coronavirus infection in Hubei Province and Wuhan City." Therefore, many people believe that the Ministry of Civil Affairs has designated these five charitable organizations as the donation entities in Hubei and Wuhan, but this understanding is not accurate.

First of all, according to Article 35 of the "Charity Law", donors can donate through charitable organizations or directly to beneficiaries. "Announcement No. 476" emphasizes how to deal with the funds and materials raised by charitable organizations, and does not make requirements for donors, let alone require donors to donate funds and materials to these five institutions. Secondly, "Announcement No. 476" does not stipulate that only these five charitable organizations can raise funds and materials for epidemic prevention and control. Other legally established charitable organizations can still carry out fundraising in accordance with regulations. Third, the "Charity Law" stipulates that charitable organizations are subject to the supervision and management of the corresponding civil affairs departments, and the charitable fundraising plan should be filed with the corresponding civil affairs departments. The announcement strengthens the supervision and guidance of the receipt of funds and materials raised by charities, which is beyond reproach. "Announcement No. 476" does not restrict their eligibility to receive donations for public welfare institutions such as hospitals and individuals in need.

However, at the regular press conference on the prevention and control of pneumonia epidemic of novel coronavirus infection in Hubei Province held on January 27, the leaders of Wuhan City clearly emphasized when answering reporters' questions, "All donated materials must be donated through the Red Cross Society. The province is to accept donations through the Red Cross Society of the province, and Wuhan City is to accept donations through the Red Cross Society of Wuhan City..." This kind of statement that does not leave any room for maneuver and resolutely implements a one-size-fits-all approach expands the original requirements of the Ministry of Civil Affairs for charitable fundraising to all social public welfare donations, which may violate relevant laws and regulations.

In our country, charity is part of the concept of public welfare. In addition to complying with the "Charity Law", we must also comply with the "Public Welfare Donation Law". Public hospitals, as public welfare non-profit institutions, are legitimate recipients. If an enterprise directly donates materials to a hospital in Wuhan, but it is received by the Red Cross Society of Wuhan City, it violates the provisions of Article 5 of this law: The use of donated property shall respect the wishes of the donor, conform to the purpose of public welfare, and shall not misappropriate the donated property for other purposes. If at the press conference, " must " advocate, encourage, support ", wouldn't that be much better?

Although I also understand the principle of using heavy penalties in troubled times, as the leader said at the press conference: "The reason for doing this is to unify our jurisdiction and avoid being exploited by certain people or some people due to chaos in the process of epidemic prevention and control." However, strengthening donation management should not only be considered from the perspective of facilitating implementation, but also from the perspective of openness and transparency. Whether it is the "Charity Law", the "Public Welfare Donation Law" or the "Measures for the Disclosure of Information by Charitable Organizations", they all propose to use information platforms to disclose relevant information, which is the statutory obligation of charitable organizations and cannot be avoided. In the face of public doubts and information such as donation agreements, funding agreements, procurement agreements, procurement system processes and standards that are of social concern, relevant institutions should take the initiative to disclose them in a timely manner. At the same time, it is not enough to rely solely on relevant institutions to disclose relevant information in a timely manner. Relevant national regulatory authorities, news media, third-party big data platforms, and the public can actively intervene to improve the openness and transparency of donation information and establish credibility.

Now many institutions initiate fundraising on their own, and there are also many fundraising initiated by individuals. Then they use the funds raised to purchase urgently needed protective equipment for the front line. This operation method actually violates current laws and regulations.

The "Charity Law" stipulates that charitable fundraising includes public fundraising to the general public and targeted fundraising to specific objects. To carry out public fundraising, it should be carried out by charitable organizations that have obtained a public fundraising qualification certificate issued by the civil affairs department. Article 3 of the "Measures for the Management of Public Fundraising by Charitable Organizations" clearly states: Charitable organizations that have legally obtained public fundraising qualifications can carry out fundraising to the public, and organizations and individuals that do not have public fundraising qualifications shall not carry out public fundraising. Article 101 of the "Charity Law" also stipulates that if an organization or individual that does not have public fundraising qualifications carries out public fundraising, the civil affairs department shall give a warning and order to stop the fundraising activities; for the property illegally raised, it shall be ordered to return it to the donor; if it is difficult to return it, the civil affairs department shall confiscate it and transfer it to other charitable organizations for charitable purposes; the relevant organization or individual shall be fined not less than 20,000 yuan but not more than 200,000 yuan.

However, what is distressing is that in the face of the urgent need to replenish front-line epidemic prevention medical supplies, many hospitals in Wuhan and Hubei are really desperate and directly announced their fundraising needs to the public. As a non-profit public hospital, although it can become a legal donee, it cannot become a legal public fundraising initiator. In this way, when the people of the whole country feel sorry for the most beautiful retrograde of front-line medical staff, who can open this mouth to investigate the responsibility of the hospital!

Fortunately, according to Article 26 of the "Charity Law", organizations or individuals without public fundraising qualifications may cooperate with charitable organizations with public fundraising qualifications for charitable purposes, and the charitable organizations shall carry out public fundraising and manage the raised funds and materials. If the fundraising needs released by the hospitals are confirmed by charitable organizations with public fundraising qualifications, and distributed to the relevant hospitals after registration by the charitable organizations according to the designated donation model, the relevant operations will be legal and compliant. Speaking of which, the Wuhan leaders' requirement of "must" for donated materials at the press conference is a bit like a roundabout way to save the country!

——Corporate Income Tax
 

Article 9 of the "Enterprise Income Tax Law" stipulates that the expenditure on public welfare donations incurred by an enterprise shall be allowed to be deducted when calculating the taxable income, up to 12% of the total annual profit. Article 51 of the "Enterprise Income Tax Law Implementation Regulations" stipulates that public welfare donations refer to donations made by enterprises through public welfare social organizations or the people's governments at or above the county level and their departments for charitable activities and public welfare undertakings that comply with the provisions of the law. The "Notice on Relevant Policies for Pre-tax Carry-over Deduction of Enterprise Income Tax on Public Welfare Donation Expenditures" (Cai Shui [2018] No. 15) clarifies that enterprises donate through public welfare social organizations or people's governments at or above the county level (including the county level) and their constituent departments and directly affiliated institutions for charitable activities and public welfare undertakings. The donation expenditure within 12% of the total annual profit is allowed to be deducted when calculating the taxable income; the part exceeding 12% of the total annual profit is allowed to be carried forward to the following three years for deduction when calculating the taxable income.

The enterprise's love donation to Wuhan definitely belongs to public welfare donation, which means that it can be deducted from the taxable income, and then the tax payable is calculated according to the enterprise income tax rate. If the donation does not exceed 12% of the current year's profit, the amount of the donation will be deducted, and the excess will be deducted within three years. Moreover, there are requirements for the donation object. Donations made directly to the donee, such as enterprises donating money and goods directly to the hospital without going through a charitable organization, are not allowed to deduct the corresponding donation amount from the taxable income. Speaking of this, I can't help but applaud the Wuhan leaders' statement on the 27th press conference that donations "must be". I don't know if the leaders are reminding the majority of enterprises not to forget to enjoy the tax preferences given by the state when they dedicate their love!

——Individual Income Tax

I was shocked to hear that Xinba, the e-commerce leader, donated 150 million yuan, including 100 million yuan in cash to the Wuhan Charity Federation and 50 million yuan in cash to establish a material relief fund. I don't know if it is true or false, but there should be many people with money and feelings. The national tax policy cannot make good people suffer. According to Article 6 of the "Individual Income Tax Law": Individuals who donate their income to education, poverty alleviation, and poverty alleviation and other public welfare and charitable undertakings may deduct the donation amount not exceeding 30% of the taxable income declared by the taxpayer from their taxable income. At the same time, it is also stipulated that if the State Council stipulates that full pre-tax deduction shall be implemented for donations to public welfare and charitable undertakings, its provisions shall prevail. This article is very powerful. It should be noted that during the Wenchuan earthquake, the Ludian earthquake, the Lushan earthquake, and the Zhouqu mudslide, the State Council authorized the Ministry of Finance and the State Administration of Taxation to issue normative documents stipulating that individuals donate to disaster-stricken areas through public welfare social organizations, people's governments at or above the county level and their departments. , is allowed to be fully deducted before personal income tax in the current year. If the State Administration of Taxation introduces similar policies for this epidemic, it will have no impact on those who still need to consider special additional deductions for individual income tax, but it will have a great impact on those whose comprehensive individual income tax rate reaches 45% and the operating income tax rate reaches 35%! Of course, this group also has the strength to become the main force of public welfare donations.

——Value-added Tax

Many of the donations this time are medical materials and equipment produced by the company itself, as well as construction materials for the Huolei Two Gods Mountain Hospital. According to the "Detailed Rules for the Implementation of the Provisional Regulations on Value-Added Tax", the goods produced by the donor shall be regarded as sales, and the output tax amount shall be determined according to the sales amount. The sales amount shall be determined in the following order: First, it shall be determined according to the average sales price of similar goods in the most recent period of the taxpayer; second, it shall be determined according to the average sales price of similar goods in the most recent period of other taxpayers; third, it shall be determined according to the composition tax price: composition tax price = cost × (1 + cost profit rate). For the donee, the input tax amount can be deducted for the value-added tax special invoice obtained. The donating enterprise is also regarded as sales anyway. For the donee who has legitimate needs for deducting input tax amount, it is better to do good to the end and issue a value-added tax special invoice.

Enterprises that donate services, intangible assets, and real estate for public welfare undertakings or to the public shall not be regarded as sales, and value-added tax shall be exempted. In addition, with reference to similar policies, such as the services provided free of charge by enterprises to the Beijing Winter Olympics Organizing Committee in accordance with the sponsorship agreement related to the Beijing 2022 Winter Olympics, Winter Paralympics, and test matches, value-added tax is exempted; during the Wenchuan earthquake, the Ludian earthquake, the Lushan earthquake, and the Zhouqu mudslide, units and individual businesses will produce, entrust processing or purchase goods, and donate them to disaster-stricken areas through public welfare social organizations, people's governments at or above the county level and their departments, value-added tax is exempted, and it is hoped that the State Administration of Taxation will also introduce relevant policies to exempt value-added tax for donations to the new coronavirus epidemic area.

Finally, end this article with a sentence from "Wuhan Ya" that made countless people cry:

Give a hand, and it will pass, come on Wuhan! Come on China!