State Taxation Administration Announcement  No. 61 of 2018

For the purpose of implementing the newly amended Individual Income Tax Law of the People’s Republic of China and its Implementation Regulations, the State Taxation Administration has formulated Proposed Administrative Measures for Individual Income Tax Withholding. The Measures are hereby issued and shall enter into force from January 1, 2019.

It is hereby announced.

Annex: Individual Income Tax Rates and Withholding Rates

State Taxation Administration

                                              December 21, 2018

Proposed Administrative Measures for Individual Income Tax Withholding

 Article 1 To regulate the withholding of individual income tax and protect the legitimate rights and interests of taxpayers and withholding agents, the Measures are formulated in accordance with Individual Income Tax Law of the People’s Republic of China and its Implementation Regulations, Tax Collection and Administration Law of the People’s Republic of China and its Implementation Rules, and other relevant laws and regulations.

Article 2 Withholding agents refer to organizations or individuals that make payments of incomes to individuals. Withholding agents shall, in accordance with the law, withhold tax in full.

Tax withholding in full means that a withholding agent shall file with the tax authority in charge relevant information on all individuals to whom it makes payments of incomes, the amount of such incomes paid, deductible items and the amounts thereof, specific amounts of the taxes withheld and the total amount thereof, and other relevant information by the 15th day of the month following that in which the taxes are withheld.

Article 3 Tax withheld per month or each time by a withholding agent shall be turned over to the State treasury by the 15th day of the month following that in which the tax is withheld. And the withholding agent shall file Withholding Return for Individual Income Tax.

Article 4 Taxable income subject to individual income tax withholding in full shall include:

(1) Income from salary and wages;

(2) Income from remuneration for personal services;

(3) Income from author’s remuneration;

(4) Income from royalties;

(5) Income from interest, dividends or bonuses;

(6) Income from leasing of assets;

(7) Income from transfer of assets; and

(8) Incidental income.

Article 5 When paying taxpayers income for the first time, a withholding agent shall complete Basic Information Form for Individual Income Tax (Form A) based on the basic information such as taxpayer identification numbers provided by the taxpayers and file with the tax authority Form A when filing the withholding return in the month following that in which the payments are made.

The withholding agent shall file with the tax authority changes in relevant basic information reported by the taxpayers when filing the withholding return in the month following that in which the changes occur.

Article 6 When paying a resident individual income from salary and wages, a withholding agent shall calculate the tax to be withheld by using the cumulative withholding method and file the withholding return on a monthly basis.

The cumulative withholding method means that a withholding agent, at the time of withholding tax within a tax year, calculates the cumulative amount of tax that shall be withheld based on Schedule 1 (see Annex) and the cumulative amount of taxable income for withholding, which is the balance of the cumulative income from salary and wages of a taxpayer paid by the organization as of the current month after deduction of cumulative tax-exempt income, cumulative deducted expenses, cumulative special deductions, cumulative itemized deductions for specific expenditures, and other cumulative deductible items determined by law, and then takes the balance of the said cumulative amount of tax that shall be withheld after deduction of the cumulative amount of tax reductions and exemptions and the cumulative amount of tax that has been withheld as the amount of tax that shall be withheld in the current period. Where such balance is negative, no tax shall be refunded temporarily. Where the balance is still negative after the end of the tax year, the taxpayer may claim a tax refund or shall pay the underpaid tax through the annual tax reconciliation for comprehensive income.

The specific calculation formula is as follows:

Amount of tax that shall be withheld in the current period = (cumulative amount of taxable income for withholding × withholding rate - quick calculation deduction) - cumulative amount of tax reductions and exemptions - cumulative amount of tax that has been withheld

Cumulative amount of taxable income for withholding = cumulative income - cumulative tax-exempt income - cumulative deducted expenses - cumulative special deductions - cumulative itemized deductions for specific expenditures - other cumulative deductible items determined by law

Wherein: The cumulative deducted expenses are calculated multiplying 5,000 yuan per month by the number of months for which the taxpayer has been employed by the withholding agent as of the month in the current year.

Article 7 Where a resident individual provides the withholding agent with relevant information and requests the handling of his/her itemized deductions for specific expenditures in accordance with the law, the withholding agent shall deduct relevant items from the resident individual’s taxable income in accordance with the regulations when withholding tax from income from salary and wages monthly, and shall not reject such request.

Article 8 When paying a resident individual income from remuneration for personal services, income from author’s remuneration or income from royalties, a withholding agent shall withhold tax on a monthly basis or each time using the following method:

The modified income from remuneration for personal services, author’s remuneration or royalties shall be the balance of the income received after deduction of expenses. Income from author’s remuneration shall be calculated as 70 percent of the actual amount.

Deduction of expenses: For tax withholding of income from remuneration for personal services, author’s remuneration or royalties, the amount of deduction of expenses shall be 800 yuan if the amount of income received in a single payment does not exceed 4,000 yuan; or 20 percent of the amount of income if the amount for a single payment is more than 4,000 yuan.

Taxable Income: For income from remuneration for personal services, author’s remuneration or royalties, the amount of taxable income for withholding shall be the amount of income received in a single payment, based on which the amount of tax shall be calculated. For income from remuneration for personal services, Schedule 2 (see Annex) shall apply. For income from author’s remuneration and income from royalties, a flat withholding rate of 20 percent shall apply.

When filing an annual tax reconciliation return for comprehensive income, a resident individual shall calculate the amount of income from remuneration for personal services, author’s remuneration or royalties in accordance with the law and incorporate it into the annual comprehensive income to calculate individual income tax payable. And the taxpayer may claim a tax refund or shall pay the underpaid tax.

Article 9 When paying a non-resident individual income from salary and wages, income from remuneration for personal services, income from author’s remuneration or income from royalties, a withholding agent shall withhold tax on a monthly basis or each time using the following method:

For income received from salary and wages by a non-resident individual, the amount of taxable income shall be the balance of his/her monthly income after deduction of 5,000 yuan. For income from remuneration for personal services, author’s remuneration or royalties, the taxable income shall be the amount of income received in a single payment, Schedule 3 shall apply to the calculation of tax payable. The modified income from remuneration for personal services, author’s remuneration or royalties shall be the balance of the income received after deduction of 20 percent of the amount of the income as expenses. Income from author’s remuneration shall be calculated as 70 percent of the actual amount.

The tax withholding method for non-resident individuals shall remain unchanged within a tax year. Where the conditions for a non-resident individual to be deemed as a resident individual are met, the non-resident individual shall inform his/her withholding agent of such changes in the basic information. The annual tax reconciliation return shall be filed after the end of the year in accordance with the relevant regulations on resident individuals.

Article 10 When making a payment of income from interest, dividends or bonuses, leasing of assets, transfer of assets or incidental income, a withholding agent shall withhold tax each time or on a monthly basis in accordance with the law.

Article 11 Where income from remuneration for personal services, author’s remuneration or royalties is one-off, obtaining the item of income shall be deemed as one time; for successive incomes from a same project, the income obtained within a month shall be deemed as one time.

For income from leasing of assets, the income obtained within a month shall be deemed as one time.

For income from interest, dividends or bonuses, the income obtained in a payment of interest, dividends or bonuses shall be deemed as one time.

For incidental income, obtaining the item of income each time shall be deemed as one time.

Article 12 A taxpayer who needs to claim tax treaty benefits shall make a request to the withholding agent when obtaining taxable income and submit relevant information and documents, and the withholding agent shall withhold tax in accordance with the relevant measures for claiming tax treaty benefits.

Article 13 A withholding agent that makes payments of income from salary and wages shall, within two months after the end of the year, furnish individual taxpayers with information on their individual incomes, the taxes withheld, etc. Where a taxpayer requests the furnishing of the aforesaid information in the middle of the year, the withholding agent shall provide the relevant information.

Where a taxpayer obtains income other than income from salary and wages, the withholding agent shall, after withholding the tax, furnish the taxpayer with information on his/her individual income, the tax withheld, etc., in a timely manner.

Article 14 A withholding agent shall calculate tax based on the information provided by the taxpayers and file withholding returns. The withholding agent shall not change the information provided by the taxpayers without authorization.

The withholding agent may request the taxpayer to make modifications when finding that the information provided by a taxpayer is inconsistent with the actual situation. Where the taxpayer refuses to make modifications, the withholding agent shall report it to the tax authority and the tax authority shall handle it in a timely manner.

A taxpayer shall have the right to request the withholding agent to make modifications where he/she finds that the personal information, the information on the payment of income, taxes withheld or other information provided by the withholding agent, is inconsistent with the actual situation. Where the withholding agent refuses to make modifications, the taxpayer shall report it to the tax authority and the tax authority shall handle it in a timely manner.

Article 15 A withholding agent shall, in accordance with the regulations, properly keep Information Form for Itemized Deductions of Individual Income Tax provided by taxpayers for future inquiry.

Article 16 A withholding agent shall, in accordance with the law, keep confidential the itemized deductions for specific expenditures and other relevant tax-related information and documents submitted by taxpayers.

Article 17 A commission equal to two percent of the amount of tax withheld in accordance with the regulations shall be paid to a withholding agent on an annual basis. Such amount does not include tax deficiencies made up upon examination or ordered to be withheld by tax authorities, judicial authorities, etc.

The commission received by the withholding agent may be used to improve its taxpayer service capabilities and reward its staff in charge of tax matters.

Article 18 Withholding agents shall perform the obligations of tax withholding in accordance with the law, and taxpayers shall not reject it. Where a taxpayer rejects tax withholding, the withholding agent shall report it to the tax authority.

Article 19 Where a withholding agent fails to submit documents and information to the tax authority in accordance with the regulations, falsely reports or makes itemized deductions that are not based on the information provided by taxpayers, fails to withhold tax that shall be withheld, fails to remit or remits less than the tax withheld, borrows or illegally uses the identities of others, etc., corresponding action shall be taken in accordance with Tax Collection and Administration Law of the People’s Republic of China and other relevant laws and administrative regulations.

Article 20 The formats of forms, certificates, vouchers and documents related to the Measures shall be separately formulated and issued by the State Taxation Administration.

Article 21 The Measures shall enter into force from January 1, 2019. Circular of the State Taxation Administration on Issuing Provisional Administrative Measures for Individual Income Tax Withholding in Full (Guoshuifa [2005] No.205) shall be repealed simultaneously.

All information in this document is authentic in Chinese. English is provided for reference only. In case of any discrepancy, the Chinese version shall prevail.