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PERSONAL INCOME TAX LAW OF THE PEOPLE'S REPUBLIC OF CHINA

  (as adopted by the Third Session of the Fifth National People's Congress
on September 10, 1980; first amended by the "Decision on Amendments
to the Personal Income Tax Law of the People's Republic of China"
of the Fourth Session of the Standing Committee of the Eighth
National People's Congress on October 31, 1993; then amended
by the "Decision on Amendments to the 'Personal Income
Tax Law of the People's Republic of China of the Eleventh Session
of the Standing Committee of the Ninth National People's Congress
on August 30, 1999.)
 

SUBJECT: TAXATION

ISSUING-DEPT: STATE ADMINISTRATION OF INDUSTRY & COMMERCE

ISSUE-DATE: 08/30/1999

IMPLEMENT-DATE: 08/30/1999

LENGTH: 1820 words

TEXT:

Article 1: An individual who is domiciled within the borders of China or who is not domiciled, but lives within the borders of China for no less than one year shall pay personal income tax on any income obtained from within or outside of Chinese borders according to the stipulations hereof. An individual who neither is domiciled nor lives within the borders of China or who is not domiciled and lives within the borders for less than a year shall pay personal income tax on any income obtained from within Chinese borders according to the stipulations hereof.

Article 2: The following personal incomes shall be taxed:

2. 1. Wages and salaries;

2.2. Operating income of privately owned businesses;

2.3. Income from contracted management or leasehold management for enterprises or institutions;

2.4. Remuneration for labor services;

2.5. Income from author's remuneration;

2.6. Income from franchise royalties;

2.7. Interest, dividends, and bonuses;

2.8. Income from the lease of property;

2.9. Income from the assignment of property;

2.10. Accidental income;

2.11. Any other income deemed taxable by the Finance Department of the State Council.

Article 3: Personal income tax rates:

3.1. Progressive tax rates in excess of specific amounts shall apply to wages and salaries, the rates being five percent to 45 percent (refer to the tax rate schedule attached).

Progressive tax rates in excess of specific amounts, at five percent to 35 percent, shall apply to the operating income of privately owned businesses and income from contracted management or leasehold management for enterprises or institutions (refer to the tax rate schedule attached).

3.3. A proportional tax rate of 20 percent shall apply to income from author's remuneration with 30 percent of the taxable income being tax exempt.

3.4. A proportional tax rate of 20 percent shall apply to income from remuneration for labor services; for exceptionally high one‑off income from remuneration for labor services, the tax rate can be marked up. Detailed procedures shall be determined by the State Council.

3.5. A proportional tax rate of 20 percent shall apply to the income from franchise royalties, interest, dividends, bonuses, income from the lease of property, income from the assignment of property, accidental income and any other types of income.

Article 4: The following personal incomes are exempt from personal income tax:

4.1. Pecuniary awards in such areas as science, education, technology, culture, health, sports, and environmental protection, bestowed by the provincial‑level people's government, ministries and commissions of the State Council, units at or above the level of Army Commander in the Chinese People's Liberation Army, foreign organizations or international institutions;

4.2 Interest from national government bonds or financial bonds issued by the state;

4.3. Subsidies and allowances given in accordance with the unified regulations of the state;

4.4. Welfare benefits, survivor's pensions, and relief payments;

4.5. Insurance compensation;

4.6. Military severance pay and demobilization pay for servicemen and servicewomen;

4.7. Relocation allowances, severance pay, retirement pay, retirement pay for veteran cadres, and living allowances for retired veteran cadres in accordance with the unified regulations of the state;

4.8. Income of diplomatic representatives, consular officers, and other personnel of foreign embassies and consulates in China entitled to tax exemption as provided for in the applicable law of the state;

4.9. Income that is tax free as stipulated in the international conventions entered into or agreements signed by the Chinese government;

4. 10. Income that is tax free as approved by the Finance Department of the State Council;

Article 5: In one of the following cases, personal income tax may be abated after approval:

5.1.Where it involves the income of the disabled, or elderly persons or family members of a martyr;

5.2. Where a serious natural disaster causes major losses;

5.3. Where tax abatement has been approved by the Finance Department of the State Council under other circumstances;

Article 6: Calculation of taxable income:

6.1. For income from wages and salaries, the balance of monthly income after deduction of RMB 800 (US$97) in expenses is the taxable income.

For the operating income of privately owned businesses, the balance of the total income in each tax year after deduction of costs, expenses, and losses is the taxable income.

6.3. For income from contracted management or leasehold management for enterprises or institutions, the balance of the total income in each tax year after deduction of necessary expenses is the taxable income.

6.4. For income from the remuneration of labor services, income from author's remuneration, income from franchise royalties, and income from the lease of property, if the income received each time does not exceed RMB 4,000 (US$484), then RMB 800 (US$97) is deductible as expenses; if it exceeds RMB 4,000, 20 percent shall be deducted as expenses. The balance in each case is the taxable income.

6.5. For income from the assignment of property, the balance of the income from such assignment after deduction of the original value of the property and reasonable expenses is the taxable income.

6.6. For income from interest, dividends, bonuses, accidental income and other income, the amount received each time is the taxable income. Personal contributions to education and other undertaldngs for the public good shall be deducted from the taxable income in accordance with the relevant regulations of the State Council.

For those taxpayers who are not domiciled within Chinese borders, but receive wages and salaries from within Chinese borders, and those taxpayers who are domiciled within Chinese borders, but receive wages and salaries from outside of the Chinese borders, additional deductible expenses may be determined according to their average income level, living standard, and foreign exchange rate fluctuation. The scope of application and scale of such additional deductible expenses shall be stipulated by the State Council.

Article 7: For income received by a taxpayer from outside Chinese borders, he or she shall be allowed to deduct from his taxable amount any personal income tax already paid outside Chinese borders, provided that such deduction does not exceed the taxable amount of the income received by this taxpayer from outside the borders as calculated according to the stipulations hereof.

Article 8: For the purpose of personal income tax, the income earner is the taxpayer, and the unit or individual paying such income is the withholding agent. Taxpayers who receive wages and salaries from two or more sources and who have no withholding agents shall file returns and pay taxes of their own accord.

Article 9: The tax money deducted by the withholding agent each month and the tax money payable by the self‑declared taxpayer should be paid into the state treasury within the first seven days of the following month. Tax returns shall be submitted to the tax authorities.

The tax money payable on wages and salaries shall be calculated and paid on a monthly basis and shall be paid into the state treasury by the withholding agent or taxpayer within the first sevendays of the following month. And tax returns shall be submitted to the tax authorities. The tax money payable on wages and salaries in certain industries may be calculated on a yearly basis and paid by advance monthly payment. The detailed procedures shall be stipulated by the State Council.

The tax money payable on the operating income of privately owned businesses shall be calculated on a yearly basis and paid by advance monthly payment, to be made by the taxpayer within the first seven days of the following month. The account shall be settled and cleared within three months after the end of each year, with any overcharge returned and any balance made up.

Any taxpayer who receives his or her income from outside Chinese borders shall pay tax into the state treasury and submit tax returns to the tax authorities within 30 days after the end of each year.

Article 10: The calculation of all types of income shall be in the local currency, renminbi. If any income is denominated in a foreign currency, it shall be converted to reminbi according to the foreign exchange rate set by the state foreign exchange administration authorities for purposes of tax payment.

Article 11: A two percent handling charge is payable to the withholding agent on the basis of the tax money he or she has withheld.

Article 12: The introduction of personal income tax on income from savings interest and the procedure for the collection of such tax shall be determined by the State Council.

Article 13: The management of personal income tax collection shall be conducted in accordance with the provisions of the "Law on the Management of Tax Revenue Collection in the People's Republic of China."

Article 14: The State Council shall formulate implementation regulations according to this Law.

Article 15: This Law comes into effect upon promulgation.

Personal Income Tax Rate Schedule 1 (applicable to income from wages and salaries)

Level Monthly Taxable Income Tax Rate (%)
1 Less than RMB 500 5
2 RMB 500.01 to 2000 10
3 RMB 2,000.01 to 5000 15
4 RMB 5,000.o1 to 20,000 20
5 RMB 20,000.01 to 40,000 25
6 RMB 40,000.01 to 60,000 30
7 RMB 60,000.01 to 80,000 35
8 RMB 80,000.01 to 100,000 40
9 More than RMB 100,000 45

(Note: The monthly taxable income referred to in this schedule means the balance of the monthly income after deduction of RMB 800 (US$97) in expenses or the balance after the deduction of additional deductible expenses, as stipulated in Article 6 hereunder.)

Personal Income Tax Rate Schedule 2

(applicable to the operating income of privately owned businesses and income from contracted management or leasehold management for enterprises or institutions)

Level Annual Taxable Income Tax Rate (%)
1 Less than RMB 5,000 5
2 RMB 5000.01 to 10,000 10
3 RMB 10,000.01 to 30,000 20
4 RMB 30,000.01 to 50,000 30
5 More than 50,000 35

(Note: The annual taxable income referred to in this schedule means the balance of total income in each year after deduction of costs, expenses, and losses in accordance with the provisions of Article 6 hereunder.)