Individual income tax law | govt.chinadaily.com.cn

Individual income tax law

Updated: Jul 17, 2018 mofcom.gov.cn Print

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

(Passed at the 3rd session of the 5th NPC on 10th September 1980; The Law was amended for the sixth time in accordance with the "Decision of the 21st Session of the Standing Committee of the 11th National People’s Congress on Amending the 'Law of the People’s Republic of China on Individual Income Tax'" on June 30, 2011)

Article 1  Individual income tax shall be levied in accordance with the provisions of this Law by individuals who have domiciles in China, or though without domiciles but have resided for one year or longer in China on their income derived from sources within and outside China.

Individuals who are neither domiciled nor reside in China, or who are not domiciled or reside for less than one year in China, shall pay individual income tax in accordance with this Law on income derived from sources within China.

Article 2  Individual income tax shall be levied on the following categories of income:

1. Income from wages and salaries;

2. Income from production or business operation derived by individual industrial and commercial households;

3. Income from contracted or leased operation of enterprises or institutions;

4. Income from remuneration for personal services;

5. Income from author's remuneration;

6. Income from royalties; 

7. Income from interest, dividends and bonuses;

8. Income from lease of property; 

9. Income from transfer of property; 

10. Contingent income; and 

11. Other income specified as taxable by the financial department of the State Council. 

Article 3  Individual income tax rates:

1. Income from wages and salaries shall be taxed at progressive rates ranging from 3 percent to 45 percent (see the appended tax rate schedule).

2. Income from production and business of individual industrialists and merchants and income from contracted or leased operation of enterprises or institutions shall be taxed at progressive rates ranging from 5 percent to 35 percent (see the appended tax rate schedule).

3. Income from author's remuneration shall be taxed at a flat rate of 20 percent, the amount of tax payable, however, shall be reduced by 30 percent.

4. Income from remuneration for personal services shall be taxed at a flat rate of 20 percent. Where a specific payment of income from remuneration for personal services is excessively high, additional tax can be levied at a rate which shall be specifically determined by the State Council.

5. Income from royalties, interest, dividends, bonuses, lease of property and transfer of property, as well as contingent income and other income shall be taxed at a flat rate of 20 percent. 

Article 4  The following categories of income shall be exempted from individual income tax:

1. Awards for achievements in science, education, technology, culture, public health, physical culture and environmental protection granted by the provincial people's governments, ministries and commissions under the State Council, the People's Liberation Army units at army level and above and by foreign or international organizations;

2. Interest income on saving deposits and national debt obligations and other financial debentures issued by the state;

3. Subsidies and allowances received under the state uniform provisions;

4. Welfare benefits, survivors' pensions and relief payments;

5. Insurance indemnities;

6. Military severance pay and demobilization pay received by members of the armed forces;

7. Settlement pay, severance pay, retirement pay and retirement living allowances received by public servants and workers under state uniform provisions;

8. Income derived by the diplomatic agents and consular officers and other personnel who are exempt from tax under the provisions of the relevant Laws of China;

9. Income exempt from taxes as stipulated in the international conventions in which the Chinese Government is a party and in the agreements which China has signed; and

10. Income exempt from taxes with the approval of the financial departments of the State Council.

Article 5  In any of the following situations, individual income tax may be reduced upon approval:

1. Income derived by disabled persons, unsupported aged persons or members of martyr's family;

2. The tax payer suffers major losses caused by disasters;

3. Other cases in which reduction is approved by the financial departments of the State Council.

Article 6  The amount of taxable income shall be computed as follows:

1. For income from wages and salaries, a monthly deduction of 3500 yuan shall be allowed for expenses and the excess part shall be the taxable income.

2. For income from production or business operation derived by individual industrial and commercial households, 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 contracted or leased operation of enterprises or institutions, the taxable income shall be the amount remaining from the gross income in a tax year after the deduction of necessary expenses;

4. For income from remuneration for personal services, author's remuneration, royalties and lease of property, a deduction of 800 yuan shall be allowed for expenses, if the amount received in a single payment is less than 4000 yuan; for single payments of 4000 yuan or more, a deduction of 20 percent shall be allowed for expenses. The remaining amount after the deduction shall be the taxable income;

5. For income from transfer of property, the taxable income shall be the amount remaining from the gross transfer income after deducting the original value of the property and reasonable expenses;

6. For interest, dividends, bonuses, contingent income and other income, the taxable income may be the full amount received in each payment.

The part of individual income donated to educational and other public welfare undertakings shall be deducted from the taxable income in accordance with the relevant regulations formulated by the State Council.

For the tax payer who has no domicile in China but derives wages and salaries from sources within China, or has domicile in China but derives wages and salaries from sources outside China, the additional deduction for expenses shall be allowed on the basis of the average income level, living standard and the changes of exchange rates. The scope of application and amount of the additional deduction for expenses shall be regulated by the State Council.

Article 7  Income tax paid to foreign tax authorities by the taxpayer on income derived from sources outside China shall be allowed as credit against the amount of income tax payable. The creditable amount, however, shall not exceed the amount of tax otherwise payable under this Law in respect of the income derived from the sources outside China.

Article 8  For individual income tax, the income earner shall be the taxpayer and the paying unit or individual shall be the withholding agent. Where taxpayers earn income higher than the amount specified by the State Council or receive wages or salaries from two or more payers, or taxpayers have no withholding agent or in other cases ruled by the State Council, the taxpayers should file tax returns and pay tax by the rules of the State. The withholding agents shall fully withhold the tax and pay the tax by the State rules.

Article 9 The tax withheld by the withholding agent on a monthly basis, and the tax paid by the self-filing individual, shall be paid to the state treasury within the first 15 days of the following month together with the tax returns filed with the tax authorities.

For income from wages and salaries, the tax shall be levied on a monthly basis. The tax shall be withheld by the withholding agent or paid by the self-filing taxpayers to the state treasury within the first 15 days of the following month together with the tax returns filed with the tax authorities. For income from wages and salaries in specified industries, the tax may be computed on annual basis and paid in advance in monthly installments. specific rules shall be regulated by the State Council.

For income from production or business operation derived by individual industrial and commercial households, the tax payable shall be computed on an annual basis and paid in advance in monthly installments. Such payments shall be made within the first 15 days after the end of each month and the final settlement shall be made within three months after the end of each tax year. Refund is for any overpayment or a supplemental payment for any deficiency.

For income from contracted or leased operation of enterprises and institutions, the tax payable shall be computed on an annual basis and paid to the state treasury within thirty days after the end of each tax year, together with the tax returns filed with the tax authorities. For the taxpayers receiving income from contracted or leased operation in installment during the year, the tax payable shall be paid in advance installments within the first 15 days after each time when a payment is made, and the final settlement shall be made within three months after the end of each tax year; Refund is for overpayment or a supplemental payment for any deficiency.

For taxpayers who derive income outside China, the tax payable shall be paid to the state treasury within thirty days after the end of each tax year, together with the tax returns filed with the tax authorities.

Article 10  All categories of income shall be computed in Renminbi (RMB). Income in foreign currency shall be converted into Renminbi for tax purposes according to the exchange rate quoted by the state exchange control authorities. 

Article 11  A handling fee of 2 percent of the amount of tax withheld shall be paid to the withholding agent.

Article 12  The State Council shall rule the levying time and the collection method on the Individual Income Tax on savings interest.

Article 13  The administration of the individual income tax shall be implemented in accordance with the "Law of the People's Republic of China on the Administration of Tax Collection".

Article 14  The detailed rules and regulations for the implementation shall be formulated by the State Council in accordance with this Law.

Article 15  This Law shall enter into force on the day of its promulgation.

Schedule 1 - Individual Income Tax Rates (applicable to income from wages and salaries) shall be amended as:

Grade                  Monthly Taxable Income                                     Tax Rate (%)

1                      Income of 1500 yuan or less                                               3

2      That part of income in excess of 1500 to 4500 yuan                     10

3        That part of income in excess of 4500 to 9000 yuan                   20 

4        That part of income in excess of 9000 to 35000 yuan                 25

5        That part of income in excess of 35000 to 55000 yuan               30 

6        That part of income in excess of 55000 to 80000 yuan               35 

7        That part of income in excess of 80000 yuan                                 45

(Note: "Monthly taxable income" mentioned in this schedule refers to the amount remaining from the gross income in a month after the deduction of 3500 yuan and the additional deduction for expenses in accordance with the provision of Article 6 of this Law.

Schedule 2 - Individual Income Tax Rates (applicable to income from production or business operation derived by industrial and commercial households and income from contracted or leased operation of enterprises and institutions.) shall be amended as:

Grade              Annual Taxable Income                                        Tax Rate (%) 

1                 Income of 15000 yuan or less                                                 5 

2        That part of income in excess of 15000 to 30000 yuan              10

3        That part of income in excess of 30000 to 60000 yuan              20

4        That part of income in excess of 60000 to 100000 yuan            30 

5          That part of income in excess of 100000 yuan                           35

(Note: "Annual taxable income" mentioned in this schedule refers to the amount remaining from the gross income in a tax year after the costs, expenses and losses have been deducted in accordance with the provision of Article 6 of this Law.)

This English version is only for reference. To learn more, please refer to the authoritative Chinese version.

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