What is the difference between public welfare and non public welfare donations in accounting?

It should be noted that donations are exempt from income tax, and the tax law does not exempt the VAT payable on these goods. According to Paragraph 8 of Article 4 of the Detailed Rules for the Implementation of the Provisional Regulations on Value-Added Tax, "donating assets, commissioned processing or purchased goods to others free of charge shall be regarded as the sale of goods." "Public welfare donations fall within the scope of "giving away to others free of charge" in the tax law, and shall be subject to value-added tax according to regulations.

The main reasons for the following reasons: first, the donation expenditure itself is not a normal and necessary expenditure related to the acquisition of operating income, which does not conform to the basic principle of pre-tax deduction, and is not allowed to be deducted before tax in principle; Second, if donation expenditures and sponsorship expenditures other than public welfare donations are allowed to be deducted before tax, taxpayers will often spend unreasonable or even illegal expenditures in the name of donations and sponsorship expenditures, which is prone to taxpayers abusing the national tax law, resulting in tax loss, which is not conducive to strengthening the tax management of donation expenditures and sponsorship expenditures other than public welfare donations.

Public welfare donations refer to public welfare and relief donations (hereinafter referred to as public welfare donations), which refer to the donations made by taxpayers to public welfare undertakings such as education and civil affairs through non-profit social organizations and state organs within the territory of China, as well as to areas suffering from natural disasters and poverty-stricken areas. Public welfare donation is a very noble act, and the national tax law encourages it through preferential policies, so many taxpayers take it for granted that public welfare donations must be tax-free and there is nothing to plan, but in fact, it is not.

In addition to public welfare donations, non-public welfare donations are non-public welfare donations.

Both of these are included in "non-operating expenses".

Answer: Yes, non-public donations are taxable.

Non-public welfare donations include commercial donations, individual charitable donations, political donations, and community contributions.

1. Commercial donations: Commercial entities donate gifts or funds for the purpose of increasing awareness of a product or service, attracting customers or improving corporate image. Commercial donations are generally made for marketing and economic gain, and have nothing to do with charity or public welfare.

2. Individual charitable donations: Individuals donate property or social resources to individuals or organizations in need, and donations may be made in the name of individuals, and funds or other sources of high capital are given to individuals or organizations in need of help. It may also be done through a trust or will.

3. Political donations: Politicians or political organizations donate funds, gifts or other resources to political parties, political groups or individuals in exchange for political benefits or public support. Different from the nature of charity and public welfare, the purpose of political donation is to obtain political power or influence, so it is a clear commercial transaction.

4. Community contribution: It is usually donated by community residents or groups for the purpose of improving the community environment, enhancing community cohesion and self-governance, etc. Community contributions are generally voluntary, not for-profit, and do not follow public interest regulations and instructions for the use of funds.

Community contribution can have a positive effect on improving the environment and life of the community, and enhance the sense of identity and community cohesion of community residents.

The meaning of non-public welfare donation

Non-public welfare donations refer to donations that are not related to charity or public welfare. Unlike public benefit giving, non-public benefit donations may be made out of self-interest or organizational interests. Non-public interest donations include donations of property, money, goods, or other resources.

Donors are typically corporations, political organizations, individuals, or other similar organizations.

Donations may be used for purposes such as sponsoring a certain competition, increasing product awareness, donating to individuals or political organizations in exchange for political gain, etc. Unlike philanthropic donations, non-philanthropic donations do not have the same tax benefits as charitable organizations or nonprofit organizations.

Non-public welfare donations that do not meet the following conditions are non-public donationsAccording to the tax law, eligible organizations include the China Youth Development Association, the Hope Project, the Soong Ching Ling Association, the Disaster Reduction Committee, the Red Cross Society of China, the China Disabled Persons' Federation, the National Association for the Elderly, the Association for the Promotion of Old Areas, and other non-profit public welfare organizations approved by the civil affairs department.

To non-profit organizations, associations, etc.

1. Donations to the Red Cross.

2. Donation to China Greening Association.

3. Donations to specific educational undertakings, such as donations to primary and secondary schools funded by the state.

4. Donations to certain specific cultural undertakings, such as national key symphony orchestras, ballet troupes, opera troupes, Peking Opera troupes, public libraries, museums, science and technology museums, art galleries, etc.

5. Donations to certain groups, such as the Chinese Cultural Revival Movement Promotion Committee, the Self-improvement and National Salvation Association, the Solidarity and Self-improvement Association, the Market Development Association, etc.

6. Donations for wind disasters, fires, etc.

From January 1, 2019 to December 31, 2022, enterprises are allowed to deduct the amount of taxable income held by enterprises for poverty alleviation in targeted poverty alleviation areas through public welfare social organizations or people** at or above the county level (including county level) and their constituent departments and directly affiliated institutions. During the policy implementation period, if the target poverty alleviation areas have achieved poverty alleviation, the above policies may continue to be applied.

The part of the public welfare donation expenditure incurred by the enterprise within 12% of the total annual profit is allowed to be deducted when calculating the taxable income. For the donated projects, the local people should be given support and preferential treatment.

During the epidemic, many enterprises have donated through public welfare organizations or relevant departments. So how much do you know about the accounting treatment of public welfare donations? What are the requirements for VAT payment? Let's follow the deep space network to find out!

Accounting for public welfare donations.

1. Provisions on pre-tax deduction of public welfare donations.

Public welfare donations refer to the donations made by enterprises for public welfare undertakings stipulated in the Public Welfare Donation Law of the People's Republic of China through public welfare social organizations or people** at or above the county level and their departments. For the public welfare donation expenses incurred by the enterprise, the part that does not exceed 12% of the total annual profit can be deducted.

2. Accounting entries for public welfare donations.

1. Monetary asset donation.

Borrow: Non-operating expenses.

Credit: bank deposits, etc.

2. Donation of non-monetary assets.

Borrow: Non-operating expenses.

Credit: Inventory of goods.

Tax Payable – VAT payable (output tax).

3. Can the input tax of public welfare donations be deducted?

Answer: Public welfare donations cannot be deducted from VAT, so the input tax on public welfare donations cannot be deducted. It can only be deducted before corporate income tax, and the deduction amount cannot exceed 12% of the total profit of the enterprise.

Are charitable donations subject to VAT?

Answer: Public welfare donations, including goods and services (services). There is a difference between the two types of donations in terms of paying VAT. The details are as follows:

1. Public welfare donations for services, such as housekeeping companies providing free cleaning services for nursing homes. In accordance with the relevant regulations, if the provision of services free of charge is used for public welfare, it is not subject to VAT.

If the provision of services free of charge is used for public welfare, it is a non-VAT item and does not need to be transferred out of the input.

2. For the public welfare donation of goods, it is necessary to distinguish between two situations. The first is that under normal circumstances, public welfare donations need to determine the sales revenue according to the fair value of the goods and pay VAT. The second is that eligible public welfare donations can be exempted from VAT.

Units or individual industrial and commercial households are exempt from value-added tax if they donate the goods they produce, entrust processing or purchase to the target poverty alleviation areas through public welfare social organizations, people at or above the county level and their constituent departments and rock-resistant institutions directly under them, or directly and free of charge.

Accounting entries related to fixed asset donations.

Accounting entries for donated finished products.

1. Deemed sales are treated through the main business income, and the accounting entries are as follows:

Borrow: Non-operating expenses.

Credit: main business income.

Taxes payable - tax payable on the completion value of additional and demolished mu (output tax).

Borrow: Cost of main business.

Credit: Inventory of goods.

2. Handling of account travel affairs transferred by cost:

Borrow: Non-operating expenses.

Credit: Inventory of goods.

Public welfare donations can be divided into cash and in-kind donations, and the specific operations are as follows:

1. Cash donation:

Borrow: Non-operating expenses - donations, Credit: cash in hand or bank deposits, 2. Donations in kind:

In the event of a donation expense: Pose for a photo.

Borrow: non-operating expenses - donations, credit: inventory goods, taxes payable - value-added tax payable (output tax), the donation expenditure of enterprises for public welfare undertakings through public welfare social organizations or people at or above the county level ** and their departments, within 12% of the total annual profit, is allowed to be deducted when calculating the taxable income.

We argue that public welfare donations refer to public welfare and relief donations, which refer to taxpayers' donations to public welfare undertakings such as education and civil affairs, as well as natural disaster areas and poverty-stricken areas through non-profit social organizations and state organs in China.