CHINESE
Individual Income Tax of the People's Republic of China
10-27-2007

(Adopted by the Third Session of the Fifth National People's Congress on September 10, 1980 and Promulgated on the same day on Order No. 11 of the Chairman of the Standing Committee of the NPC; Revised on the "Resolution on Amendments to the Individual Income Tax Law of the People's Republic of China" adopted at the Fourth Session of the Standing Committee of the Eighth National People's Congress on October 31, 1993)

Article 1 An individual having residence in China or having resided in China for one year or more although without a permanent residence therein shall pay individual income tax on income from inside and outside China in accordance with the provisions of this Law.  

An individual who neither has residence nor lives in China or who has no residence and has lived in China for less than one year shall pay individual income tax on income from inside China in accordance with the provisions of this Law.

Article 2 Individual income tax shall be levied on the categories of personal income listed below:
  
1. Income from wages, salaries,

2. Income of individual industrial and commercial operators from production or business operation,

3. Income from business operations contracted or leased from enterprises or other undertakings,

4. Income from labor service,

5. Income from remunerations to authors,

6. income from royalties,

7. Income from interests, dividends and bonuses,

8. Income from the leasing of property,

9. Income from transfer of property,

10. Accidental income,

11. Other types of income specified as taxable by the financial departments under the State Council.

Article 3 Rates of individual income tax:

1. A progressive tax rate on income in excess of a specific amount, ranging from 5% to 45%, shall be applicable to income from wages and salaries in excess of a specified amount (Table of tax rates attached to the end of this Law).
  
2. A progressive rate of tax on income in access of a specific amount, ranging from 5% to 35%, (a table of tax rates attached to the end of this Law) shall be applicable to income of individual industrial or commercial business operators in production or business operation or from business operations leased or contracted from enterprises or undertakings in excess of specified amounts.

3. A flat rate of 20% of individual income tax shall be applicable to remunerations to authors and the tax payable shall be reduced by 30%.

4. A flat rate of 20% of individual income tax shall be applicable to income from labor service. Tax shall be levied on particularly high income from service remuneration by additional percentage points, and the specific provisions thereof shall be formulated by the State Council.

5. A flat rate of 20% of income tax shall be applicable to income from royalties, profits, dividends, bonus, income from lease or transfer of property, accidental income and other income.

Article 4 The categories of income listed below shall be free from individual income tax:

1. Awards for outstanding performances in science, education, technology, culture, public health, sports, environmental protection and other fields granted by provincial people's governments, ministries and commissions of the level of a ministry under the State Council and units at or higher than an army of the Chinese People's Liberation Army, and organizations of foreign countries and international organizations.

2. Interests on savings deposits, state bonds and financial debentures issued by the State,

3. Allowances and subsidies issued by uniform standards by the state,

4. Welfare benefits, pensions for the disabled and survivors and relief payments,

5. Insurance indemnities,

6. Decommission and demobilization pay to officers and soldiers,

7. Settlement pay, severance pay, and pensions to staff members and workers and pensions and subsidies to veteran cadres issued by uniform standards formulated by the State,

8. Income of foreign diplomats, consulate officials and other officials of foreign embassies and consulates in China free from individual income tax in accordance with the provisions of the relevant laws of China,

9. Income free from individual income tax in accordance with the provisions of the international conventions and agreements the Chinese government has participated in or signed,

10. Other income exempted from individual income tax with the approval of the departments of finance under the State Council.

Article 5 Individual income tax may be reduced with official approval for cases listed below:

1. Income of the disabled, aged widows and widowers and dependents of fallen heroes,

2. Heavy losses resulting from natural calamities,

3. Tax reductions with approval by the departments of finance under the State Council.

Article 6 Assessment of taxable income:

1. For income from wages and salaries, a monthly deduction of 800 yuan shall be allowed for expenses and that part in excess of 800 yuan shall be the taxable income,

2. For income from production or business operation of individual industrial or commercial operators, the taxable income shall be the amount remaining from the gross income in a tax year after the costs, expenses and losses have been deducted,

3. For income from business operations leased or contracted from enterprises or undertakings, the taxable income shall be the balance of the gross income in a tax year after the deduction of the necessary expenses,

4. For income from remunerations for services, remunerations to authors, royalties, income from leasing property, a deduction of 800 yuan from an income of no more than 4,000 yuan, and a deduction of 20% for expenses from the gross income of more than 4000 yuan, and the excess thereof shall be the taxable income,

5. For income from the transfer of property, the balance of the gross income from the transfer after the deduction of the original value thereof and reasonable expenses shall be the taxable income,

6. Each income from profits, dividends, bonuses, accidental income or other income shall be the taxable income.

Donations to education and other public welfare undertakings shall be deducted from the taxable income in accordance with the stipulations of the State Council.

For taxpayers without residence in China but having income from wages or salaries in China and taxpayers with residence in China but having wages or salaries outside China, additional tax reductions for expenses shall be assessed in light of the average income and living standards thereof and the changes of the exchange rates. The scope and standards applicable to the additional tax reductions for expenses shall be formulated by the State Council.

Article 7 A taxpayer who has paid individual income tax outside China on its income from a source outside of China shall be allowed to deduct that income tax he has paid overseas from his taxable income, but the deduction shall not exceed the tax amount payable on its income outside China assessed in accordance with the provisions of this Law.

Article 8 The income earner shall be the taxpayer of the individual income tax and the institution or individual who pays shall be the tax withholder. A taxpayer having wages or salaries from more than one source and without a tax withholder shall file tax returns and pay tax on his own.

Article 9 A tax withholder withholding tax payments and a taxpayer filing tax returns every month shall hand the tax payments to the state treasury within the first seven days of the next month and provide the tax authorities with the tax returns forms.

Tax payable on wages and salaries shall be assessed and levied every month and be handed to the state treasury by the tax withholder or taxpayer within the first seven days of the next month together with the tax return forms to the tax authorities. The payments of tax on the wages and salaries of special industries and trades may be assessed on a yearly basis and paid by monthly advances; the specific rules thereof shall be formulated by the State Council.

The tax payable on the income from the production or business operation of an individual industrial or commercial business operator shall be assessed on a yearly basis and paid by monthly advances by the taxpayer within the first seven days of the next month and the tax payable shall be cleared at the end of the tax year with excess payment refunded and deficit made up by supplementary payment.

The tax payable on income derived from operations contracted or leased from an enterprise or undertaking shall be assessed on a yearly basis and paid by the taxpayer to the state treasury within 30 days after the year-end and with the tax returns filed by the taxpayer to the tax authorities. The taxpayer who gets income from contracted or leased business operations on a number of occasions in a year shall pay a tax advance payment within seven days after an income is obtained and clear the tax payable within three months after the year-end with the excess payment refunded and deficit made up by supplementary payment.

A taxpayer with income obtained from a source outside China shall pay the tax payable to the state treasury within 30 days after the year-end and file tax returns to the tax authorities.

Article 10 Incomes shall be accounted for in RMB. If an income is in a foreign currency, it shall be converted into RMB at the official exchange rate quoted by the State Administration of Exchange Control.

Article 11 A tax withholder shall be given a commission which is 2% of the tax payment withheld thereby.

Article 12 The individual income tax shall be administered in accordance with the provisions of the Law of the People's Republic of China on the Administration of Tax Collection.

Article 13 The State Council shall formulate regulations for the implementation of this Law in accordance with this Law.

Article 14 This Law shall come into force as from the day of its promulgation.  


Table 1 of Individual Income Tax Rates
(applicable to income from wages and salaries)

Grade

Taxable income of the month

Tax rate (%)

1

2

3

4

5

6

7

8

9

Less than 500

The portion of income in excess of 500 to 2,000 yuan

The portion of income in excess of 2,000 to 5,000 yuan

The portion of income in excess of 5,000 to 20,000 yuan

The portion of income in excess of 20,000 to 40,000 yuan

The portion of income in excess of 40,000 to 60,000 yuan

The portion of income in excess of 60,000 to 80000 yuan

The portion of income in excess of 80,000 to 100,000 yuan

The portion of income in excess of 100,000 yuan

5

10

15

20

25

30

35

40

45

Note: “The taxable income of the month” in this table refers to the amount of a monthly income after deduction of 800 yuan for expenses or additional deductions for expenses in accordance with the provisions of Article 6 of this Law.

Table 2 of Individual Income Tax Rates

(Applicable to income of individual industrial or commercial operators

from production and business operation or income from business operations

leased or contracted from an enterprise or undertaking)

Grade

Taxable income of the year

Rate(%)

1

2

3

4

5

Not exceeding 5,000 yuan

The portion of income in excess of 5,000 to 10,000 yuan

The portion of income in excess of 10,000 to 30,000 yuan

The portion of income in excess of 30,000 to 50,000 yuan

The portion of income in excess of 50,000 yuan

5

10

20

30

35

Note: The “taxable income of the year” in the table refers to the taxable income based on the gross income of a tax year after the deductions for costs, expenses and losses in accordance with the provisions of Article 6 of this Law.

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