Notice of State Taxation Administration of The People's Republic of China of the Ministry of Finance on Relevant Policies for Pre-tax Deduction of Enterprise Income Tax for Loan Loss Reserves of Financial Enterprises (Caishui [215] No.9): According to the relevant provisions of the Enterprise Income Tax Law of the People's Republic of China and the Implementation Regulations of the Enterprise Income Tax Law of the People's Republic of China, The pre-tax deduction policy of enterprise income tax for loan loss reserves drawn by policy banks, commercial banks, finance companies, urban and rural credit cooperatives and financial leasing companies is hereby notified as follows: 1. The loan assets allowed to draw loan loss reserves before tax include: (1) loans (including loans such as mortgages, pledges and guarantees); (2) Risk assets with loan characteristics such as bank card overdraft, discount, credit advances (including bank acceptance bill advances, letter of credit advances, guarantee advances, etc.), import and export bills, interbank lending, and financing lease receivables; (3) Foreign loans that are lent by financial enterprises and bear the responsibility for external repayment include loans from international financial organizations, loans from foreign buyers, loans from foreign governments, unconditional loans from Japan Bank for International Cooperation and mixed loans from foreign governments. II. The calculation formula of loan loss reserve allowed by financial enterprises for pre-tax deduction in the current year is as follows: loan loss reserve allowed for pre-tax deduction in the current year = balance of loan assets allowed to withdraw loan loss reserve at the end of this year? 1%- the balance of loan loss reserve that has been deducted before tax by the end of last year. If the amount calculated by the financial enterprise according to the above formula is negative, the taxable income of the current year shall be increased accordingly. Therefore, the loan loss reserve accrued from the financial leasing company's receivable financial leasing funds that meet the above conditions can be deducted before tax, and other reserve expenditures that do not meet the requirements of the competent departments of finance and taxation of the State Council are not allowed to be deducted before tax.