Policy

Implementation Regulations for the Individual Income Tax Law of the People’s Republic of China

The author:管理员 date:2019-2-26 read:1360

Fourth Revision on 18 December 2018 pursuant to State Council Order No. 707

Promulgated on 28 January 1994 via Order No. 142 of the State Council of the People's Republic of China

First Revision made on 19 December 2005 pursuant to the Decision of the State Council on Revision of the "Implementation Regulations for the Individual Income Tax Law of the People's Republic of China"

Second Revision made on 18 February 2008 pursuant to the Decision of the State Council on Revision of the "Implementation Regulations for the Individual Income Tax Law of the People's Republic of China"

Third Revision made on 19 July 2011 pursuant to the Decision of the State Council on Revision of the "Implementation Regulations for the Individual Income Tax Law of the People's Republic of China"

Article 1    These Regulations are formulated pursuant to the Individual Income Tax Law of the People's Republic of China (hereinafter referred to as the "IIT Law").

Article 2    Individuals who have a domicile in China referred to in the IIT Law shall mean individuals who habitually reside in China due to household registration, family and economic interests; income derived in China and overseas referred to in the IIT Law shall mean income sourced in China and foreign-sourced income respectively.

Article 3    Unless otherwise stipulated by the finance authority and the tax department of the State Council, the following income shall be deemed income sourced in China, regardless if the place of payment is in China:

(1) Income derived from labour services provided in China due to tenure of office, employment, performance of contract, etc;

(2) Income derived from lease of property to a lessee for use in China;

(3) Income derived from licensing of various licensing rights for use in China;

(4) Income derived from transfer of properties such as immovable property in China or transfer of other properties in China; and

(5) Income from interest, dividends and bonuses derived from enterprises, institutions, other organisations and resident individuals in China.

Article 4    For an individual who does not have a domicile in China and has resided in China for 183 days or more cumulatively in a tax year for less than six consecutive years, his/her foreign-sourced income paid by an overseas organisation or individual shall, upon filing with the tax authority in charge, be exempted from individual income tax; where he/she leaves China for more than 30 days in any year in which he/she resides in China for 183 days or more cumulatively, the computation of consecutive number of years for which he/she resides in China for 183 days or more cumulatively shall restart.

Article 5    For an individual who does not have a domicile in China and resided in China for not more than 90 days cumulatively in a tax year, his/her income sourced in China which is paid by his/her overseas employer and not borne by the said employer's organisation or workplace in China shall be exempted from individual income tax.

Article 6    The scope of various individual income stipulated in the IIT Law shall be:

(I) income from wages and salaries shall mean wages, salaries, bonuses, year-end increments, profit sharing, allowances and subsidies derived by individuals from tenure of office or employment, as well as other income in relation to their tenure of office or employment.

(II) income from labour remuneration shall mean income derived by individuals engaging in design, renovation, installation, drafting, laboratory testing, testing, medical, legal, accounting, consultancy, lecturing, translation, proofreading, painting and calligraphy, sculpting, video, audio recording, video recording, performance, advertising, exhibition, technical services, introduction services, brokerage services, agency services and other personal services.

(III) Income from author's remuneration shall mean income derived by individuals from publication of their works in the form of books and newspapers etc.

(IV) income from  royalties shall mean income derived by individuals from provision of patents, trademark rights, copyrights, non-patented technology and the right to use other licensing rights; income derived from provision of the right to use copyrights shall exclude income from author's remuneration.

(V) Income from business operation shall mean:

1. Income derived from production and business operation by an individually-owned business, as well as income from production and business operation of a sole-proprietorship enterprise or a partnership registered in China derived by an investor of the sole-proprietorship enterprise or a partner individual of the partnership enterprise;

2. income derived by an individual from engaging in school, medical, consulting and other paid services pursuant to the law;

3. income derived by an individual from business operation and contracted operation of enterprises or institutions as well as from sub-contracting and sublet operation; and

4. income derived by an individual from other production and business operation.

(VI) Income from interest, dividends and bonuses shall mean income derived by individuals from interest, dividends and bonuses in relation to possession of creditor's rights and equity.

(VII) Income from lease of property shall mean income derived by individuals from leasing of immovable property, machinery and equipment, vehicles and vessels and other properties.

(VIII) Income from transfer of property shall mean income derived by individuals from transfer of priced securities, equity, share of properties of a partnership enterprise, immovable property, machinery and equipment, vehicles and vessels and other properties.

(IX) Contingent income shall mean income derived by individuals from awards, prizes, lottery and other income of contingent nature.

The category of taxable income for income derived by individuals which is difficult to classify shall be determined by the tax department of the State Council.

Article 7    The measures on levying of individual income tax on income from share transfer shall be separately stipulated by the State Council, and filed record with the Standing Committee of the National People's Congress.

Article 8    Income derived by individuals shall include cash, in kind, priced securities and economic interests in other forms; for income in the form of in kind, the taxable income amount shall be computed based on the price stated on the voucher obtained; where there is no voucher for in kind or where the price stated on the voucher is obviously low, the taxable income amount shall be determined with reference to the market value; for income in the form of priced securities, the taxable income amount shall be determined based on the par value of the voucher and the market value; for income in other forms of economic interests, the taxable income amount shall be determined with reference to the market value.

Article 9    Interest on treasury bonds referred to in item (2) of the first paragraph of Article 4 of the IIT Law shall mean interest derived by individuals holding bonds issued by the Ministry of Finance of the People's Republic of China; interest on financial debentures issued by the State shall mean interest derived by individuals holding financial debentures issued with the approval of the State Council.

Article 10    Subsidies and allowances issued in accordance with the unified provisions of the State referred to in item (3) of the first paragraph of Article 4 of the IIT Law shall mean special government allowances and veteran academician allowances granted in accordance with the provisions of the State Council, as well as other subsidies and allowances which are exempted from individual income tax in accordance with the provisions of the State Council.

Article 11    Welfare benefits referred to in item (4) of the first paragraph of Article 4 of the IIT Law shall mean living subsidies paid to individuals out of welfare funds or union funds appropriated by enterprises, institutions, State organs or social groups in accordance with the relevant provisions of the State; relief funds shall mean subsidies paid by civil administration authorities of the people's governments at all levels to individuals with living difficulties.

Article 12    Income derived by diplomatic agents and consular officers and other personnel of all embassies and consulates in China who should be exempted from tax in accordance with the provisions of the relevant laws of China referred to in item (8) of the first paragraph of Article 4 of the IIT Law shall mean income exempted from tax in accordance with the provisions of the Regulations of the People's Republic of China on Diplomatic Privileges and Immunities and the Regulations of the People's Republic of China on Consular Privileges and Immunities.

Article 13    Other deductions determined pursuant to the law referred to in item (1) of the first paragraph of Article 6 of the IIT Law shall include payment by an individual for enterprise annuity and occupational annuity which comply with State provisions, expenditure of an individual for purchase of commercial health insurance and tax-deferred commercial pension insurance which comply with State provisions, and other deductible items stipulated by the State Council.

The special deductions, special additional deductions and other deductions determined pursuant to the law shall be capped at the taxable income amount of a resident individual in a tax year; excess amount for a tax year shall not be carried forward to subsequent years for deduction.

Article 14    "Each income item" referred to in item (2), item (4) and item (6) of Article 6 of the IIT Law shall be determined in accordance with the following methods respectively:

(1) For income from labour remuneration, income from author's remuneration or income from  royalties which is one-off income, each income item shall be each instance of deriving such income; for consecutive income of the same project, each income item shall be the income derived within one month.

(2) For income from lease of property, each income item shall be the income derived within one month.

(3) For income from interest, dividends and bonuses, each income item shall be the income derived at the time of payment of interest, dividends and bonuses.

(4) For contingent income, each income item shall be each instance of deriving such income.

Article 15    Costs and expenses referred to in item (3) of the first paragraph of Article 6 of the IIT Law shall mean all direct expenses incurred in production and business operations, and indirect expenses which are allocated as costs, as well as sales expenses, administrative expenses and financial expenses; losses shall mean losses, damages and scrap loss of fixed assets and inventories incurred in production and business activities, losses from transfer of property, bad debt loss, losses due to force majeure factors such as natural disaster, and other losses.

Where an individual who derives income from business operation does not have consolidated income, when computing his/her taxable income amount of each tax year, the tax authority shall deduct RMB60,000 expenses, special deductions, special additional deductions and other deductions determined pursuant to the law. Special additional deductions shall be deducted when handling computation and settlement.

Where a taxpayer engaging in production and business activities is unable to provide complete and accurate tax payment materials and cannot compute the taxable income amount correctly, the tax authority in charge shall assess the taxable income amount or the tax payable amount.

Article 16    Original value of the property referred to in item (5) of the first paragraph of Article 6 of the IIT Law shall be determined in accordance with the following methods:

(1) In the case of priced securities: the purchase price and the relevant expenses paid at the time of purchase pursuant to the provisions;

(2) In the case of buildings: the construction expenses or the purchase price and other relevant expenses;

(3) In the case of land use rights: the amount paid to acquire the land use rights, land development expenses and other relevant expenses; and

(4) In the case of machinery and equipment, vehicles and vessels: the purchase price, transportation expenses, installation expenses and other relevant expenses.

In the case of other properties, the original value shall be determined with reference to the aforesaid methods.

Where a taxpayer fails to provide complete and accurate vouchers for the original value of the property and is unable to accurately compute the original value of the property in accordance with the methods stipulated in the first paragraph of this Article, the original value of the property shall be determined by the tax authorities in charge.

Reasonable expenses referred to in item (5) of the first paragraph of Article 6 of the IIT Law shall mean the relevant expenses paid pursuant to the provisions at the time of sale of property.

Article 17    In the case of income from transfer of property, tax shall be computed in accordance with the balance after deduction of the original value of the property and reasonable expenses from the income amount for each transfer of property.

Article 18    In the case of income jointly derived by two or more individuals for the same income item, tax shall be computed and paid individually on the income derived by each individual in accordance with the provisions of IIT Law.

Article 19    "an individual donating his or her income to public welfare and charitable causes such as education and poverty alleviation" referred to in the third paragraph of Article 6 of the IIT Law shall mean donations made by an individual through public welfare social groups and State organs in China to public welfare and charitable causes such as education and poverty alleviation; the taxable income amount referred to shall mean the taxable income amount prior to computation of deductible donation amount.

Article 20    For consolidated income and income from business operation derived by a resident individual from China and overseas, the tax payable amount shall be aggregated and computed separately; for other income derived from China and overseas, the tax payable amount shall be computed separately.

Article 21    Individual income tax paid overseas referred to in Article 7 of the IIT Law shall mean tax payable which should be and has been actually paid by a taxpayer on income derived outside China, in accordance with the laws of the country (region) where the income is sourced from.

"the tax payable amount computed pursuant to the provisions of this Law for the said taxpayer's overseas income" referred to in Article 7 of the IIT Law shall mean the tax credit ceiling for the income tax amount paid overseas by a resident individual on consolidated income, income from business operation and other income (hereinafter referred to as the "tax credit limit"). Unless otherwise stipulated by the finance authority and the tax authority of the State Council, the sum of the tax credit limit for consolidated income sourced from an overseas country (region), the tax credit limit for income from business operation sourced from an overseas country (region) and the tax credit limit for other income sourced from an overseas country (region) shall be the tax credit limit for income sourced from the said country (region).

Where the individual income tax actually paid by a taxpayer in an overseas country (region) is less than the tax credit limit for the said country (region) computed in accordance with the provisions of the preceding paragraph, the difference in tax amount shall be paid in China; where the individual income tax actually paid by a taxpayer in an overseas country (region) exceeds the tax credit limit for the said country (region), the excess shall not be deducted from the tax payable amount of the current tax year but may be carried forward to the tax credit limit for the said country (region) in subsequent tax years. The carry forward period shall not exceed five years.

Article 22    Taxpayers claiming a credit for individual income tax paid overseas shall provide the original tax payment receipt issued by the foreign tax authorities for the year in which the tax is attributable.

Article 23    Interest referred to in the second paragraph of Article 8 of the IIT Law shall be computed in accordance with the benchmark interest rate of a Renminbi loan for the same period as the period for topping up under-paid tax which is announced by the People's Bank of China on the last day of the tax declaration period to which the tax is attributable, and be accrued daily for the period from the day following the expiry of the tax declaration period to the deadline for topping up under-paid tax. Where the taxpayer tops up under-paid tax before the deadline for topping up under-paid tax, the interest shall be accrued up to the date on which under-paid tax is topped up.

Article 24    When making payment of taxable amounts to individuals, the withholding agents shall withhold tax in advance or deduct on behalf in accordance with the provisions of the IIT Law, hand over to the treasury promptly and keep specific records for future inspection.

Payment referred to in the preceding paragraph shall include cash payment, remittance, fund transfer and payment in the form of priced securities, in kind and other forms.

Article 25    The scenarios of deriving consolidated income which necessitate computation and settlement shall include:

(1) deriving consolidated income from two or more sources, and the balance after deducting special deductions from the annual income amount of consolidated income exceeds RMB60,000;

(2) deriving one or more items of income from labour remuneration, income from author's remuneration or income from royalties, and the balance after deducting special deductions from the annual income amount of consolidated income exceeds RMB60,000;

(3) tax amount paid in advance within a tax year is less than the tax payable amount; and

(4) the taxpayer applies for tax refund.

A taxpayer applying for tax refund shall provide his/her bank account opened in China, and apply for tax refund at the locality of computation and settlement.

The detailed measures for computation and settlement shall be formulated by the tax authority of the State Council.

Article 26    Declaration and withholding of full amount for all staff referred to in the second paragraph of Article 10 of the IIT Law shall mean submission by a withholding agent of the information of all individuals whose income is withheld thereby, the amount of income paid, deductible items and amounts, specific amount and total amount of tax withheld, as well as other relevant tax information, to the tax authorities in charge within the first 15 days of the month following the tax withholding.

Article 27    The detailed measures on venue of tax declaration and payment by taxpayers and other related matters shall be formulated by the tax authority of the State Council.

Article 28    At the time of obtaining income from wages and salaries, a resident individual may provide information relating to special additional deductions to the withholding agent, for the withholding agent to deduct the special additional deductions when making tax withholding.

Where a taxpayer derives income from wages and salaries concurrently from two or more sources, and the withholding agent deducts the special additional deductions, the same special additional deduction item shall only be deducted from one source of income in a tax year.

A resident individual deriving income from labour remuneration, income from author's remuneration and income from royalties shall provide the relevant information to the tax authorities at the time of computation and settlement, for deduction of special additional deduction.

Article 29    A taxpayer may entrust the withholding agent or other organisation or individual to complete computation and settlement.

Article 30    The withholding agent shall compute and handle withholding declaration based on the information provided by the taxpayer, and shall not arbitrarily change information provided by the taxpayer.

Where the taxpayer discovers any discrepancy between the facts and the personal information, income, tax withheld information etc provided or declared by the withholding agent, the taxpayer shall have the right to require the withholding agent to amend. Where the withholding agent refuses to amend, the taxpayer shall report to the tax authorities, the tax authorities shall promptly process.

The taxpayer and the withholding agent shall, pursuant to the provisions, retain materials relating to special additional deduction. The tax authorities may conduct random inspection for special additional deduction information provided by a taxpayer; the detailed measures shall be separately stipulated by the tax authority of the State Council. Where the tax authorities discover that a taxpayer has provided false information, the tax authorities shall order the taxpayer to make correction and notify the withholding agent; in serious cases, the relevant authorities shall handle pursuant to the law, include in the creditworthiness information system and implement joint punishment.

Article 31    Where there is an error in the computation and settlement information provided by a taxpayer applying for tax refund, the tax authorities shall notify the taxpayer to make correction;

where the taxpayer makes correction, the tax authorities shall promptly process tax refund.

Where the withholding agent has not turned over the withheld tax to the treasury, this shall not affect the taxpayer's application for tax refund pursuant to the provisions, and the tax authorities shall process tax refund based on the relevant materials provided by the taxpayer.

Article 32    Where income is derived in a currency other than Renminbi, the taxable income amount shall be computed by converting the income amount to Renminbi in accordance with the Renminbi central parity rate on the last day of the month preceding the tax declaration or withholding declaration. For computation and settlement handled at the end of a year, reconversion is not required for income in non-Renminbi currency for which tax is withheld on a monthly basis, quarterly basis or for each income item; income for which under-paid tax is to be topped up, the taxable income amount shall be computed by converting the income amount to Renminbi in accordance with the Renminbi central parity rate on the last day of the last tax year.

Article 33    Tax authorities shall, at the time of making payment of handling fees to withholding agents pursuant to the provisions of Article 17 of the IIT Law, issue an income refund letter to the withholding agents; the withholding agents shall present the income refund letter to complete withdrawal formalities pursuant to the relevant provisions on treasury administration.

Article 34    Individual income tax declaration form, report on withholding of individual income tax and individual income tax payment receipt formats shall be formulated by the tax authority of the State Council on a unified basis.

Article 35    Matters relating to levying and collection of individual income tax from military personnel shall be implemented pursuant to the relevant provisions.

Article 36    These Regulations shall be implemented with effect from 1 January 2019.