Whether intermediary fees can be deducted before corporate income tax is the most frequently asked question in the finance groups and boss circles of the construction industry. Some think 'with an invoice it can be deducted,' some simply dare not pay, and others brazenly package intermediary fees as consulting fees.

01 First, Clarify: What Exactly Is an Intermediary Fee in Tax Terms?

In plain language: an intermediary fee is the remuneration for brokerage that brings deals together - you pay the intermediary, and the intermediary helps you close engineering projects, subcontracting cooperation, material procurement, equipment leasing, and other transactions.

What it is not: it is not a rebate, not a kickback, not a gratuity to the client's handler, and not a share-out to the company's own employees. These either cannot be deducted or are handled under other tax items.

In tax law, intermediary fees paid by enterprises are usually handled as 'handling fees and commission expenses,' applicable to the 'Notice of the Ministry of Finance and State Taxation Administration on the Pre-Tax Deduction Policy for Enterprise Handling Fees and Commission Expenses' (Cai Shui [2009] No. 29). Construction enterprises belong to 'other enterprises' and execute a 5% deduction limit.

02 Can It Be Deducted? Pass These Five Gates First

Whether an intermediary fee can be deducted before tax is not 'having an invoice is enough' - all five conditions must be met simultaneously:

Gate 1: Genuinely incurred and related to production and business operations. The intermediary service truly exists and indeed facilitated the business. Where there is no genuine business and it is purely pass-through invoicing, it is no longer a question of 'can it be deducted' but one of fraudulent invoicing.

Gate 2: Compliant object. The payee must be an intermediary service organization or individual with lawful operating qualifications, and must not include the two transacting parties and their employees, agents, and representatives. Gratuities to the client's handler and commissions to one's own salespeople cannot be treated as intermediary fees.

Gate 3: A contract is signed. The enterprise should sign an agency agreement or intermediary service contract with the intermediary party, specifying the service content, remuneration standard, and payment conditions. This is also a basic requirement of pre-tax deduction voucher management.

Gate 4: Compliant vouchers. If the other party is a company, an invoice must be obtained; if the other party is a natural person, the individual generally must obtain an invoice issued by the tax authority on their behalf; for small, sporadic businesses (since January 1, 2026, the VAT threshold for per-transaction taxable sales is 1,000 yuan per transaction (per day), and the small-sporadic standard is executed in sync), deduction before tax may be made with a receipt voucher and internal voucher. Vouchers must be obtained before the end of the final settlement.

Gate 5: Transfer payment. Except for commissioning an individual as agent, handling fees and commissions paid by cash or other non-transfer means shall not be deducted before tax. That is: payment to a company must go through official-to-official transfer; although cash is not absolutely prohibited for payment to an individual, transfer with a trace is strongly recommended in practice.

The final red line: the 5% limit. The deductible limit is calculated as 5% of the revenue amount confirmed under the contract signed with the intermediary; the excess shall not be deducted and shall be added back in the final settlement.

03 A Case Study

Example: A steel structure company undertakes an 8-million-yuan project; after facilitation, the intermediary charges an intermediary fee of 480,000 yuan (equivalent to 6% of the contract amount).

Corporate income tax side: deductible limit = 8,000,000 × 5% = 400,000 yuan. Of the 480,000 yuan, 400,000 can be deducted before tax; the excess 80,000 cannot be deducted and is added back in the final settlement on line 23, 'Commission and handling fee expenses,' of Form A105000, 'Schedule of Tax Adjustments.'

Individual income tax side: the intermediary is a natural person; the company's payment is income from remuneration for providing services and is subject to withholding. For this case of 480,000 yuan: income amount = 480,000 × (1-20%) = 384,000 yuan; the portion exceeding 50,000 yuan is subject to a 40% withholding rate with a quick-deduction of 7,000 yuan, so the withheld IIT = 384,000 × 40% - 7,000 ≈ 146,600 yuan; the intermediary consolidates it into comprehensive income at the annual final settlement, with refunds or supplementary payments as applicable.

VAT side: a natural person obtaining an invoice on their behalf is treated as a small-scale taxpayer; from January 1, 2023 to December 31, 2027, taxable sales subject to a 3% levy rate are collected at a reduced 1%, plus surcharges, etc.; specifics are subject to the local tax authority's implementation stance.

This case only illustrates the calculation mechanism and does not represent all situations. Each company's contract terms, payment nodes, and invoice types differ; actual treatment is subject to the contract and the competent tax authority's stance.

04 The Eight-Piece Evidence Chain: Missing One Piece May Trigger an Addition in the Final Settlement

Pursuant to the 'Measures for the Administration of Pre-Tax Deduction Vouchers for Enterprise Income Tax' (STA Announcement [2018] No. 28), enterprises shall obtain pre-tax deduction vouchers and retain contracts/agreements, expenditure basis, payment vouchers, etc. for inspection. For intermediary fees, the most complete evidence chain is these eight pieces:

Intermediary service contract/agreement: specifying service content, facilitation target, remuneration ratio, payment conditions, and identities of both parties.

Proof of intermediation results: the facilitated engineering contract, award notification, subcontract or procurement agreement, etc.

Service-process traces: emails, WeChat communication records, meeting minutes, and the project information and inspection arrangements provided by the intermediary.

Compliant invoice: an invoice for 'brokerage agency service - intermediary fee' issued by the other company, or an invoice obtained by the natural person on their behalf.

Payment voucher: bank transfer receipt with the remark 'intermediary fee,' official-to-official or official-to-individual.

Tax-payment voucher: the withholding certificate or filing record for individual income tax withheld.

Internal approval form: payment application, contract review record, expense reimbursement form, etc.

Intermediary fee ledger: registering object, contract amount, remuneration, invoice number, and payment date entry by entry.

In one sentence: the value of the evidence chain is to prove 'the business is real and the remuneration is reasonable,' not to assemble a pile of paper. The two pieces most easily overlooked among the eight are the service-process traces and the ledger.

05 Three Most Common Pitfalls

Pitfall 1: Having an invoice ≠ can be deducted. An invoice is only one of the vouchers. Where there is no genuine business and the intermediation is fictitious, the invoice not only fails to help you deduct but also brings fraudulent-invoicing risk.

Pitfall 2: Packaging intermediary fees as 'consulting fees' or 'service fees' to bypass the 5% limit. Tax inspection looks at the substance of the contract; changing the product name does not change the nature of the business, and once found to be false reporting, it faces back-tax, late-payment fees, and fines.

Pitfall 3: Cash payment and private-account pass-through. Intermediary fees paid in cash to a unit shall not be deducted before tax; paying intermediary fees from a personal account is equivalent to directly severing the 'capital flow' of the evidence chain and may also implicate issues such as concealed income.

06 Frequently Asked Questions

Q1: What about the portion exceeding 5%? The excess shall not be deducted before tax and is added back in the final settlement. As a general enterprise, a construction enterprise does not carry forward the excess to future years for deduction (the 18% limit and carry-forward rules for insurance enterprises are separately provided and irrelevant to the construction industry).

Q2: Can it be deducted if the intermediary did not issue an invoice? Two cases: small sporadic (since January 1, 2026, the VAT per-transaction threshold is 1,000 yuan per transaction (per day), i.e., within 1,000 yuan per single payment) can be deducted before tax with a receipt voucher and internal voucher; the receipt voucher shall state the payee's name, ID number, expenditure item, and amount; multiple payments on the same day are judged on a daily consolidated basis and may not be split to circumvent; other cases require an invoice, which must be obtained before the end of the final settlement, and those not obtained by the deadline cannot be deducted.

Q3: Can cash paid to an individual intermediary be deducted? The policy text is 'except for commissioning an individual as agent, enterprise handling fees and commissions paid in cash or other non-transfer means shall not be deducted before tax,' meaning cash is not absolutely prohibited when commissioning an individual as agent. But in practice, official transfer is strongly recommended; otherwise the evidence chain is weak and the inspection risk is high.

Q4: Can the 'intermediary fee' paid to the company's own employees be deducted as commission? No. Money paid to employees is wages and salaries, which should be consolidated into wages and salaries for IIT withholding and cannot be handled under the commission rules of Circular No. 29; otherwise the object is non-compliant.

Q5: Can a large intermediary fee (e.g., several million) be deducted in one lump sum? It is also subject to the 5% limit, and the excess cannot be deducted. In practice, it is recommended to pay in installments by contract node and recognize by year, and to communicate the stance with the competent tax authority in advance.

Q6: Who pays the IIT on an individual's intermediary fee? The payer (company) withholds and remits it, withheld and prepaid as remuneration for providing services, at a withholding rate of 20%-40%; the intermediary consolidates it into comprehensive income at the annual final settlement, with refunds or supplementary payments as applicable.

Therefore, the answer to 'can intermediary fees be deducted before tax' is never a simple 'yes' or 'no,' but 'can you prove it was genuinely incurred and compliantly paid.'

Remember the four lines: genuine business, compliant vouchers, transfer payment, 5% limit. The eight-piece evidence chain - missing one piece may trigger an addition in the final settlement.

Local implementation stances may differ. For large-amount, cross-period, or natural-person-involving intermediary arrangements, it is recommended to communicate with the competent tax authority in advance or consult a professional tax practitioner; if policies are updated, the latest provisions shall prevail.