Regulations on the Implementation of Individual Income Tax Law of the People’s Republic of China

Below you can find the translated English version of the Regulations on the Implementation of Individual Income Tax Law of the People’s Republic of China.

Article 1 This Regulation is formulated in accordance with the provisions of the Individual Income Tax Law of the People’s Republic of China ( “Tax Law”).

Article 2 An Individual who has a domicile in China as mentioned in the Paragraph 1 of Article 1 of the Tax Law shall mean an individual who habitually resides in China because of residency, family and economic interests.

Article 3 “Resided within the territory of China for one year or more”, as mentioned in the Paragraph 1 of Article 1 of the Tax Law, shall mean that a person resides in China for 365 days in a tax year. The duration of temporary trips out of China shall not be deducted from the computation of the period of stay.

Temporary trips out of China shall be defined as absences from China in a tax year for not more than 30 days in a single trip or not more than 90 days accumulatively over multiple trips.

Article 4 Income obtained within the territory of China, as mentioned in the Paragraph 1 and 2 of Article 1 of the Tax Law, shall mean income sourced within the territory of China; income obtained outside the territory of China shall mean income sourced outside the territory of China.

Article 5 The following forms of income shall be regarded as income sourced within the territory of China regardless of whether the place of payment is in China:

(1) income obtained from labor services provided in China for assumption of duty, employment, performance of contract, etc;

(2) income obtained from leasing of property to a lessee for use in China;

(3) income obtained from transferring of properties such as buildings, land use rights in China or transferring of other properties in China;

(4) income obtained from licensing of various licensing rights for use in China; and (5) income from interest, dividends and bonuses obtained from companies, enterprises and other economic organizations or individuals in China.

Article 6 Upon the approval of the tax authorities in charge, individuals who do not have a domicile in China but have resided in China for a period of more than one year and less than five years may pay individual income tax only on the part of their income which is sourced outside the territory of China and paid by companies, enterprises and other economic organizations or individuals in China; individuals who have resided in China for more than five years shall pay individual income tax on all income sourced outside the territory of China from the sixth year.

Article 7 Individuals who do not have a domicile in China but have resided in China for a period no more than 90 days consecutively or cumulatively in a tax year, shall be exempted from individual income tax on income which is sourced within the territory of China, but is paid by an overseas employer whose organizations or places in China are not responsible for such tax.

Article 8 Individual income, as mentioned in Article 2 of the Tax Law, shall be defined according to the following forms:

(1) income from wages and salaries shall mean wages, salaries, bonuses, year-end salary increase, profit sharing, allowances, and subsidies obtained by individuals from assumption of duty or employment and other income in relation to their assumption of duty or employment.

(2) income from production and operations of private industrial and commercial households shall mean:

(a) income obtained by private industrial and commercial households engaging in industrial operations, handicraft industry, construction industry, transportation industry, commercial industry, food and beverage industry, services industry, repair industry and other industrial production and business operations;

(b) income obtained by individuals holding a license issued by the relevant government department and engaging in educational, medical, consultancy and other paid services;

  1. c) other income obtained by individuals engaging in private industrial and commercial production and business operations; and

(d) various taxable income obtained by the preceding private industrial and commercial households and individuals in relation to production and operations.

(3) income from contracting and leasing enterprises and public institutions shall mean income obtained by individuals engaging in contracting operations, leasing operations, subcontracting and sub-leasing, including income from wages and salaries obtained by individuals on a monthly basis or for each project.

(4) income from remuneration for labor services shall mean income obtained by individuals engaging in design, renovation, installation, drafting, chemical experiment, testing, medical, legal, accounting, consultancy, lecturing, news, broadcasting, translation, proofreading, painting and calligraphy, sculpting, video, audio recording, video recording, performance, advertising, exhibition, technical services, introduction services, brokerage services, agency services and other labor services.

(5) income from author’s remuneration shall mean income obtained by individuals from publication of their articles in books and newspapers.

(6) income from licensing fees shall mean income obtained by individuals from provision of patents, trademark rights, copyrights, non-patented technology and the right to use other licensing rights; income obtained from licensing the right to use copyrights shall be excluded from the income from author’s remuneration.

(7) income from interest, dividends and bonuses shall mean income obtained by individuals from interest, dividends and bonuses in relation to possession of creditor’s rights and shares.

(8) income from leasing of property shall mean income obtained by individuals from leasing of buildings, land use rights, machinery and equipment, vehicles and vessels and other properties.

(9) income from transferring of property shall mean income obtained by individuals from transfer of priced securities, shares, buildings, land use rights, machinery and equipment, vehicles and vessels and other properties.

(10) occasional income shall mean income obtained by individuals from awards, prizes, lottery and other income of an occasional nature.

The definition of income obtained by individuals which is difficult to classify into one of the above-mentioned forms shall be determined by the tax authorities.

Article 9 The measures on collection of individual income tax on income from share transferring shall be separately formulated by the Ministry of Finance and submitted to the State Council for approval before implementation.

Article 10 Income obtained by individuals shall include cash, physical assets, securities and economic interests in other forms. The taxable amount of income in the form of physical assets shall be computed on the basis of the price stated on the voucher obtained; where there is no voucher for physical assets or where the price stated on the receipt is obviously low, the taxable amount shall be determined with reference to the market value. The taxable amount of income in the form of securities shall be determined based on the par value of the voucher and the market value. The taxable amount of income in other forms of economic interests shall be determined with reference to the market value.

Article 11 “Excessively high one-time income from remuneration for labor services”, as mentioned in Item 4 of Article 3 of the Tax Law, shall mean one-time income from labor remuneration obtained by individuals whose taxable income amount exceeds RMB 20,000.

The part of taxable income amount which exceeds RMB 20,000 but does not exceed RMB 50,000 shall be levied with an additional 50% tax on top of the tax amount computed in accordance with the provisions of the Tax Law; the part of taxable income amount which exceeds RMB 50,000 shall be levied with an additional 100% tax on top of the tax amount computed in accordance with the provisions of the Tax Law.

Article 12 “Interest accruing from treasury bonds”, as mentioned in Item 2 of Article 4 of the Tax Law, shall mean interest income obtained by individuals holding bonds issued by the Ministry of Finance of the People’s Republic of China; interest accruing from financial bonds issued by the State shall mean interest income obtained by individuals holding financial bonds issued with the approval of the State Council.

Article 13 “Subsidies and allowances granted in accordance with the State’s unified regulations”, as mentioned in Item 3 of Article 4 of the Tax Law, shall mean special government allowances, academician allowances and senior academician allowances granted in accordance with the provisions of the State Council and other subsidies and allowances which are exempted from individual income tax in accordance with the provisions of the State Council.

Article 14 “Welfare benefits”, as mentioned in Item 4 of Article 4 of the Tax Law shall mean living subsidies paid to individuals sourcing from retention of welfare funds or union funds in the enterprises, public institutions, State organs or social organizations in accordance with the relevant provisions of the State; relief funds shall mean subsidies paid by civil administration authorities of the State to individuals with living difficulties.

Article 15 “Income obtained by diplomatic agents and consular officers and other personnel who should be exempted from tax in accordance with the provisions of the relevant laws of China”, as mentioned in Item 8 of Article 4  of the Tax Law, shall mean income exempted from tax in accordance with the provisions of the Regulations of the People’s Republic of China on Diplomatic Privileges and Immunities and the Regulations of the People’s Republic of China on Consular Privileges and Immunities.

Article 16 The range and periods of reduction of individual income tax, as mentioned in Article 5 of the Tax Law, shall be stipulated by the People’s Governments of the respective provinces, autonomous regions and municipalities directly under the Central Government.

Article 17 “Costs and expenses”, as mentioned in Article 6, Paragraph 1, Item 2 of the Tax Law, shall mean all direct expenses and indirect expenses and sales expenses, administrative expenses and financial expenses which are allocated as costs incurred by taxpayers engaging in production and operations; losses shall mean all non-operating expenses incurred by taxpayers during the course of production and operations.

In the event that a taxpayer engaging in production and business fails to provide complete and accurate tax information and is unable to properly compute the taxable income amount, the taxable income amount shall be determined by the tax authorities in charge.

Article 18 “Gross income in each tax year”, as mentioned in Article 6, Paragraph 1, Item 3 of the Tax Law, shall mean income from business profits and income from wages and salaries obtained by a taxpayer in accordance with the stipulation of an operation contract or leasing operation contract; deduction of the necessary expenses shall mean the deduction of RMB 3,500 per month.

Article 19 Original value of the property, as mentioned in Article 6 , Paragraph 1, Item 5 of the Tax Law, shall mean:

(1) for securities, the purchase price and the relevant expenses paid at the time of purchase in accordance with the provisions;

(2) for buildings, the construction expenses or the purchase price and other relevant expenses;

(3) for land use rights, the amount paid to acquire the land use rights, land development expenses and other relevant expenses;

(4) for machinery and equipment, vehicles and vessels, the purchase price, transportation expenses, installation expenses and other relevant expenses; and

(5) for other properties, the original value shall be determined with reference to the preceding methods.

In the event that a taxpayer fails to provide complete and accurate vouchers for the original value of the property and is unable to properly compute the original value of the property, the original value of the property shall be determined by the tax authorities.

Article 20 “Reasonable expenses”, as mentioned in Article 6, Paragraph 1, Item 5 of the Tax Law, shall mean the relevant expenses paid at the time of sale of property in accordance with the provisions.

Article 21 “Each time”, as mentioned Article 6, Paragraph 1, Item 4)and 6 of the Tax Law, shall be defined as follows:

(1) for one time income from remuneration for labor services, “each time” means any occasion such income is obtained. In the case of income of a continual nature from remuneration for labor services for the same project, “each time” means each occasion on which income is obtained during a period of one month.

(2) for income from author’s remuneration, each time means when the income is obtained from each instance of publication.

(3) for income from licensing fees, “each time” means each instance in which income is obtained from the licensing of a licensing right.

(4) for income from leasing of property, “each time” means each instance in which income is obtained during a period of one month.

(5) for income from interest, dividends and bonuses, “each time” means occasions when income is obtained due to the payment of interest, dividends and bonuses.

(6) for occasional incomes, “each time” means each instance income of an occasional nature is obtained.

Article 22 In the case of income from transferring of property, tax shall be computed based upon the remaining balance after deduction of the original value of the property and reasonable expenses.

Article 23 In the case of income jointly obtained by two or more individuals for the same income item, tax shall be computed on the income obtained by each individual after the respective deduction of expenses in accordance with the Tax Law.

Article 24 “Income donated by individuals to education and other public welfare services”, as mentioned in Paragraph 2 of Article 6 of the Tax Law, shall mean income for donations made by individuals through social organizations and State organs in China to education and other public welfare services and to areas stricken by poverty or suffering from serious natural disasters.

The portion of donated income which does not exceed 30% of the taxable income amount declared by a taxpayer may be deducted from the taxable income amount.

Article 25 Basic pension insurance premiums, basic medical insurance premiums, unemployment insurance premiums and housing fund payments made by Employers for their employees, or by the employees in accordance with the provisions of the State, shall be deducted from the taxable income amount of the taxpayer.

Article 26 “Income from wages and salaries outside the territory of China”, as mentioned in  Paragraph 3 of Article 6 of the Tax Law, shall mean income from wages and salaries related to the assumption of duty or employment outside the territory of China.

Article 27 “Additional deduction for expenses”, as mentioned in Paragraph 3 of Article 6 of the Tax Law, shall mean a further deduction for expenses based on the amount stipulated in Article 29 of this Regulation, in addition to the deduction of RMB 3,500 per month.

Article 28 “Scope of application of additional deduction for expenses”, as mentioned in Paragraph 3 of Article 6 of the Tax Law, shall include:

(1) foreign personnel who work for foreign-invested enterprises and foreign enterprises in China;

(2) foreign experts employed by enterprises, institutions, social organizations and State organs to work in China;

(3) individuals who have domiciles within the territory of China and obtain income from wages and salaries in relation to the assumption of duty or employment outside the territory of China; and

(4) other personnel defined by the finance department and tax department of the State Council.

Article 29 “The standard for additional deduction for expenses”, as mentioned in Paragraph 3 of Article 6 of the Tax Law, shall be RMB 1, 300.

Article 30 Implementation for overseas Chinese and compatriots from Hong Kong, Macao and Taiwan shall be made with reference to the provisions of Articles 27, 28 and 29 of this Regulation.

Article 31 The tax amount payable for income both obtained in and outside the territory of China by individuals who have a domicile within the territory of China, or who do not have a domicile within the territory of China but have resided in China for one year or more shall be computed separately.

Article 32 “Individual income tax paid outside China”, as mentioned in Article 7 of the Tax Law, shall mean tax payable and tax actually paid by a taxpayer on income obtained outside the territory of China, in accordance with the laws of the overseas country or region where the income is sourced.

Article 33 “Tax amount payable computed in accordance with the provisions of the Tax Law”, as mentioned in Article 7 of the Tax Law, shall mean the tax amount payable on income obtained outside the territory of China, computed in accordance with the standards for deductions for expenses and applicable tax rate stipulated in the Tax Law, and based on the different countries or regions involved and taxable items. The sum of tax amount payable for different taxable items for the same country or region shall be the upper limit for deductions for such country or region.

Where the individual income tax actually paid by a taxpayer in an overseas country or region is less than the upper limit for deductions for the said country or region, computed in accordance with the provisions of the preceding paragraph, the difference in tax shall be paid in China; where the individual income tax actually paid by a taxpayer in an overseas country or region exceeds the upper limit for deductions for the said country or region, the excess shall not be deducted from the tax amount payable of the current tax year, but may be carried forward for deduction from the balance of the upper limit for deductions for said country or region in subsequent tax years. The period in which the tax amount may be carried forward shall not exceed five years.

Article 34 Taxpayers applying for deduction of individual income tax paid outside of the territory of China in accordance with the provisions of Article 7 of the Tax Law shall provide the original tax payment receipt issued by the foreign tax authorities.

Article 35 Withholding agents who make taxable payments to individuals shall, at the same time, make their withholdings in accordance with the provisions of the Tax Law, pay the taxes withheld to the treasury on time and keep specific records for future inspection.

“Payment”, as mentioned in the preceding paragraph, shall include cash payment, remittance, bank transfer and payment in the form of securities, physical assets and other forms of tax payments.

Article 36 Taxpayers of the following classifications shall make tax payments and declarations with the tax authorities in accordance with the related regulations:

(1) Taxpayers who earn an annual income of RMB 120,000 and above;

(2) Taxpayers who obtain income from wages and salaries from two or more sources in China;

(3) Taxpayers who obtain income outside the territory of China;

(4) Taxpayers who obtain taxable income without a withholding agent; and

(5) Other circumstances stipulated by the State Council.

Taxpayers earning an annual income of RMB 120,000 and above shall make tax payment declaration with the tax authorities within three months from year-end.

The administrative measures on place of tax payment, declaration by taxpayers and other relevant matters shall be formulated by the State Administration of Taxation.

Article 37 “Declaration of withholding of full amount for all staff”, as mentioned in Article 8 of the Tax Law, shall require that the withholding agent submit the basic information of individuals whose taxes were paid by the agent, the amount of income tax paid, specific amount and total amounts of tax withheld as well as any other relevant tax information the month following the tax withholding to the tax authorities in charge. The administrative measures on declaration of withholding of full amount for all staff shall be formulated by the State Bureau of Taxation.

Article 38 When making tax payment declarations, taxpayers who make voluntary declarations shall be allowed to deduct the tax withheld within the territory of China from the tax amount payable in accordance with the related regulations.

Article 39 Taxpayers who obtain income from two or more categories stipulated in Article 2 of the Tax Law shall compute and pay taxes separately for each category. Taxpayers who obtain income under Item 1, 2 or 3 of Article 2 of the Tax Law from two or more sources in China shall combine income from the same category for computation and payment of tax.

Article 40 Specific industries as mentioned in Paragraph 2 of Article 9 of the Tax Law shall mean the exploration industry, ocean shipping industry, deep sea fishing industry and other industries as determined by the finance department and tax department of the State Council.

Article 41 “Tax computed on a yearly basis and paid in advance in monthly installments”, as mentioned in Article 9 of the Tax Law, shall require advance monthly payment of tax payable on income from wages and salaries obtained by employees in the specific industries stipulated in Article 40 of this Regulation, and computation of the actual tax amount payable by dividing the total income from wages and salaries in a year by 12 within 30 days after year-end. Any excess amount shall be refunded and any shortfall shall be made up.

Article 42 “Payment of tax payable to the treasury within 30 days after the year-end by the taxpayer”, as mentioned in Article 9 of the Tax Law, shall mean payment of tax payable to the treasury by the taxpayer who obtained one – off income from contracted and leasing operations at year-end, within 30 days from the date of obtaining the income.

Article 43 In accordance with Article 10 of the Tax Law, income in foreign currency shall be converted to Renminbi for computation of taxable income amount, based on the middle exchange rate published by the People’s Bank of China on the last day of the preceding month of the issuance of the tax payment receipt. In accordance with the provisions of the Tax Law, where a taxpayer has made year-end tax settlement, income in foreign currency for which tax is paid in advance on a monthly or timely basis, shall not be  exchanged again for computation purposes. The part of income for which tax is to be made up shall be exchanged to Renminbi for computation of the taxable income amount based on the exchange rate published by the People’s Bank of China on the last day of the preceding tax year.

Article 44 Tax authorities shall  issue an income refund letter to the withholding agents on a monthly basis, at the time of payment of service fee to withholding agents in accordance with Article 11 of the Tax Law. The withholding agents shall provide the income refund letter to complete withdrawal formalities with the designated banks.

Article 45 The tax return form, individual income tax withholding report and individual income tax payment receipt shall be standardized and formulated by the State Administration of Taxation.

Article 46 Tax year, as mentioned in the Tax Law and this Regulation, shall be the period from 1 January to 31 December of a Gregorian calendar year.

Article 47 With effect from tax year 1994, individual income tax shall be computed and collected in accordance with the provisions of the Tax Law and this Regulation.

Article 48 This Regulation shall become effective on the date of promulgation. The Tentative Regulations of the State Council of the People’s Republic of China on Reduction of Levying of Individual Income Tax on Income from Wages and Salaries of Expatriates Working in China promulgated by the State Council on 8 August 1987 shall be abolished simultaneously.

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