Individual Income Tax Law of the People's Republic of China

Article 1 . Individuals having permanent residence inside China or having stayed inside China for over a year without permanent residence shall pay their personal income tax according to the provisions of this law for their income obtained both within and outside China.

Individuals having no permanent residence and not staying in China and individuals having no permanent residence in China and having stayed in China less than a year shall pay their personal income taxes according to the provisions of this law for their income earned inside China.

Article 2 . The following income is subject to personal income tax:

1. Salaries and remunerations;

2. Operating income of privately owned businesses;

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

4. earnings from labour services;

5. earnings from writing;

6. earnings from royalty;

7. earnings from interest dividends, and bonus;

8. earnings from leasing property;

9. earnings from transfer of property;

10. incidental earnings.

11. other income taxable as identified by the finance authorities under the State Council.

Article 3 . Rate of personal income tax:

1. income from wages and stipends are subject to a progressive rate for the excess amount, with rates between 5% and 45%.

2. income of individual commercial and industrial units from production and operations and income from contracting operations of enterprises and institutions, the progressive rate for the excess amount between 5% and 35% shall apply.

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.

4. a proportional tax rate of 20 percent shall apply to income from remuneration for labour services; for exceptionally high one‑off income from remuneration for labour services, an additional tax may be levied. Detailed procedures shall be determined by the State Council.

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 transfer of property, incidental income and any other types of income.

Article 4 . The following personal income is exempt from personal income tax:

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 organisations or international institutions;

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

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

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

5. Insurance compensation;

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

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;

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;

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

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

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

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

2. Where a serious natural disaster causes major losses;

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

Article 6 . Calculation of taxable income:

1. For income from wages and salaries, the balance of monthly income after deduction of RMB1,600 in expenses is the taxable income.

2. 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.

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.

4. For income from the remuneration of labour 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 RMB4,000, then RMB800 is deductible as expenses; if it exceeds RMB4,000, 20 percent shall be deducted as expenses. The balance in each case is the taxable income.

5. For income from the transfer 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. For income from interest, dividends, bonuses, incidental income and other income, the amount received each time is the taxable income.

Personal contributions to education and other undertakings 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 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 the 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 and are under other circumstances specified by the State Council shall file returns and pay taxes of their own accord as per the State regulations. The withholding agent should handle the full declaration for tax payment for all of the individuals covered and for the full amount as per the State regulations.

Article 9 . The tax deducted by the withholding agent each month and the tax 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 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 seven days of the following month. Tax returns shall be submitted to the tax authorities. The tax 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 worked out 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.

The tax payable on the income from contracted management or leasehold management for enterprises or institutions shall be calculated on a yearly basis and paid by the taxpayers within 30 days upon the completion of the year. The tax returns shall be submitted to the tax authorities. In cases where taxpayers obtain income from contracted management or leasehold management in stages, they should pay in advance within 7 days upon obtaining income each time. 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, RMB. If any income is denominated in a foreign currency, it shall be converted to RMB 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 timing and 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 regulations to implement this Law.

Article 15 . This Law comes into effect upon promulgation.