Firstly, the accounting system on management fees is covered by the specified range as follows:-
"Enterprise Accounting System" s.104 provides that administrative costs are an enterprise, during its organization and management of production and operation, incurred costs. It includes the company's board of directors and executive management, while in business management in place, borne by the enterprise’s unified company funds (including administration wages, repairs, materials consumption, consumables amortization, office expenses and travel expenses, etc.), labor union funds, unemployment insurance, labor insurance, board fees, hire agency fees, consulting fees (including consultants' fees), legal fees, business entertainment, real estate tax, vehicle tax, land use tax, stamp duty, transfer fee, mineral resources compensation, amortization of intangible assets, employee education expenses, research and development charges, sewage charges, inventory shortage or overage (not including operating expenses should be included in the inventory loss), provision for bad debts and inventory impairment and so on. Administrative expenses are expenses for a period that accounts for and for tax law acknowledged, in the event of a period on which, through profit and loss account. However, due to financial and accounting principles, and the state taxes and service objects, they are different, so the two sides in the actual processing overhead exists difference.
Secondly, the principle of fiscal management fee processing differences:-
- "Enterprise accounting system" s. 102 stipulates that enterprises operates, in the production process of other expenses incurred, shall be the actual number of costs or expenses. Where in the current burden of expenses incurred, but not yet as accrued expenses are included in the costs and expenses; who have spending which should be decided by the current and future periods and the costs should be treated as prepaid expenses, amortization installments into the costs and expenses.
- s. 8 of the EIT Law states, enterprises that has actually happened to obtain income, the reasonable expenses, including costs, expenses, use, taxes, losses and other expenses permitted in computing taxable income amount.
- Enterprise Income Tax Law Implementation Regulations s. 28 provides that, expenses incurred by an enterprise should be distinguished between revenue expenditure and capital expenditure. Revenue expenditure, during the period, is in direct deduction; capital expenditures should be charged or credited by installments for cost or those assets that was not charged. In the event of a corporate expenses that are not taxable, income for the formation of cost or property, it shall not be deducted or calculated to the corresponding depreciation, amortization deduction. In addition to corporate income tax law and the provisions of this Ordinance, the enterprise’s actual cost, expenses, taxes, losses and other expenses shall not be deductible.
- From the above comparison, it can be seen: The principle of tax law emphasizes authenticity, the absence of actual expenditure disallowed, while accounting is allowed in accordance with the principle of prudence that is not actually occur, on certain asset impairment through profit or loss; the law emphasizes correlation of the original. Then, the income which obtained irrelevant expenditures may be deducted, but it does not emphasize the relevance of accounting principles, the income obtained are irrelevant expenditure that would be included in the current income ; income tax emphasize for not taxed on the costs or expenses formed property. it shall not be deducted or by calculating the corresponding depreciation, amortization, net and there is no accounting treatment for expenditure on non-taxable income or for the cost of the formation, amortization provisions are not included in the current profit and loss.
Thirdly, management fees accounting approach is superior to the tax law:-
Tax Administration Law, s. 20 provides that enterprise engages in the production and operation of the taxpayer's financial and accounting systems or financial and accounting procedures and accounting software, it should submit to the tax authorities. Taxpayer or withholding agent 's financial and accounting systems or financial and accounting procedures of the State Council or the State Council financial, tax authorities contravene the provisions of the relevant tax, it shall, in accordance with the State Council or the financial , tax authorities, be computed on the taxable payments, withholding taxes and collecting payment. Enterprise Income Tax Law s. 21 provides that when computing taxable income, corporate finance, accounting procedures and tax laws and administrative regulations, they are inconsistent and should be in accordance with the tax laws and administrative regulations that shall be computed. When calculating taxable income, the tax laws and administrative regulations states that management costs should expressly provide the taxpayer to follow the regulations; tax laws and administrative regulations provides that, if the management costs has not been expressly provided, the taxpayer must follow the relevant financial and accounting systems or financial and accounting procedures for handling. Taxpayers, during the course of management of specific projects, note the costs that need hospitality is carried out according to tax law tax adjustments; whether the unauthorized expansion of the scope of technology development costs are charged to enjoy the tax benefits; special fund or whether the requirement to the extract use; management fees paid between enterprises, business organizations within the enterprise and between the rent paid royalties is not illegal for a tax deduction and so on.
For example, A company, in 2011, its sales revenue is of RMB 200 million, there is the occurrence of production and business activities and business-related entertainment expenses of RMB 2,000,000. Corporate Income Tax Law Implementation Regulations s. 43 provides that for an enterprise's production and business activities and business entertainment expenses, it shall be, in accordance with the amount of 60% deduction occurs, cannot exceed the year sales (business) revenue 5 ‰. Since 200 × 60% = 120 (million) is greater than 20000 × 5 ‰ = 100 (million), it can only be deducted before tax RMB 1,000,000.
Fourth, Management fees in the LAT, with front "package" net:-
LAT states the real estate development costs. It refers to real estate development with project-related selling expenses, administrative expenses and financial expenses. Under the current provisions of financial accounting system, during which three(3) costs as expenses directly recognized in profit or loss, it does not apportioned according to cost accounting objects. Therefore, as a land appreciation tax deductions for real estate development costs, in administrative expenses, it is not only by the taxpayer in real estate development projects carried deduct actual expenses, the implementation details of the LAT standard deduction, i.e. , the financial cost of the interest payments, the project can be calculated by transfer of real estate assessments and provide proof of financial institutions, allowing deductions, but it should not exceed the maximum period on commercial bank lending rates for similar amount. Other real estate development costs, obtain land use rights for the amount paid and the amount of real estate development costs, should within 5% of being calculated and deducted. Where the transfer of real estate projects cannot be calculated by allocating interest expense or cannot provide proof of financial institutions, real estate development costs obtaining land use rights by the amount paid and the amount of real estate development costs shall within 10% of the one being calculated and deducted.