1. Real and reasonable asset losses related to enterprise production and operation can be deducted before enterprise income tax.

2. Asset losses incurred by enterprises shall be reported and deducted to the competent tax authorities in accordance with the procedures and requirements stipulated in People's Republic of China (PRC) State Taxation Administration of The People's Republic of China Announcement No.2011No.25. When an enterprise declares the annual final settlement of enterprise income tax, it may submit the asset loss declaration materials and tax payment materials to the tax authorities as annexes to the annual tax return of enterprise income tax.

3. Bad debt losses shall be confirmed according to the following evidential materials:

(1) Contracts, agreements or explanations on related matters;

(2) The loss of bad debts caused by the debtor's bankruptcy liquidation shall be announced by the people's court;

(3) Accounts receivable that are overdue for more than three years and have been treated as losses in accounting can be regarded as bad debt losses, but the situation should be explained and a special report should be issued;

(4) Accounts receivable that are overdue by the enterprise for more than 1 year, with a single amount not exceeding 50,000 or one ten thousandth of the total annual income of the enterprise, which have been treated as losses in accounting, can be regarded as bad debt losses, but the situation should be explained and a special report should be issued.

(5) Accounting materials and other relevant tax payment materials.