The "Implementing Regulations of the Value-Added Tax Law of the People's Republic of China," which took effect this year, stipulate that input tax corresponding to interest expenses incurred by taxpayers for loan services, as well as expenses such as investment and financing advisory fees, handling fees, and consulting fees paid to lenders that are directly related to such loan services, may not be offset against output tax for the time being. This means that, as before, loan interest and related expenses remain non-deductible. However, compared to the previously disclosed draft of the Implementing Regulations of the Value-Added Tax Law (for public comment), the officially issued Regulations contain some changes. Compared to the draft, the provision stating that interest expenses on loan services and other related costs are non-deductible now includes the word “temporarily.” Furthermore, the Regulations include an additional clause stating: “The competent financial and tax authorities of the State Council shall, at an appropriate time, study and evaluate the effectiveness of the policy prohibiting the deduction of input tax corresponding to interest and related expenses on purchased loan services from output tax.” Ge Yuyu, an associate professor at the Shanghai National Accounting Institute, stated that this change implies the state is only temporarily prohibiting the tax deduction of loan interest and related expenses, but will conduct subsequent evaluations and studies to include loan interest and similar expenses in VAT input tax deductions at an appropriate time. (Yicai)