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