China encourages corporate and individual giving

Recent months have seen three important developments in the legal and fiscal framework for China’s civil society organizations,[1] designed to increase both individual giving and corporate social responsibility. The leadership of the country has often lamented the extremely limited involvement of China’s elite in charitable giving, but is now clearly striving to increase such activities both in the light of the upcoming Olympics and to promote a harmonious society.

First, in March this year and effective from 1 January 2008, China’s Enterprise Income Tax was completely overhauled to allow both foreign and domestic companies a tax deduction on charitable contributions of up to 12 per cent of income. This means an increase of 9 per cent for domestic companies.

Second, in January, the Ministry of Finance and the State Administration of Taxation issued a Notice permitting tax-deductible contributions to be made to all ‘recognized’ public welfare organizations, whereas previously such contributions were required to be made through specially designated pass-through organizations in order to qualify. The notice sets out the process for obtaining recognition as well as rules that donors must follow in order to claim the deduction.

Finally, the newly established Legislative Department of the Ministry of Civil Affairs has begun drafting a Charity Law. Whether it will be ready in time for the 2008 Olympics is a matter of some debate, in part because a large number of areas, including volunteering and fundraising, are to be included in the law. However, a draft has been made available for comment, while a conference on the proposed law is planned for mid-June, and international experts will be invited to present their views about what charity means and how it can be encouraged.

1  The term includes both public welfare social organizations or associations and foundations. The latter are already required to be ‘public welfare’ organizations.

Karla Simon is co-founder of the International Centre for Civil Society Law. Email

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