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

Passed at the Third Session of the Fifth National People's Congress on September 10, 1980, and based on the amendment by the Fourth Session of the Standing Committee of the Eighth National People's Congress on October 31, 1993. "Decision Concerning Amendment of 'Individual Income Tax Law of the People's Republic of China'".
　
Article 1 Individual　Income　Tax　shall　be　paid　in　accordance　with　the provisions of this Law by individuals　who　have　domicile　in　China,　or though without domicile but have resided for one year or more in China on their income derived from sources within and outside China.

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

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

A. income from wages and salaries;

B. income　from　production or　business　operation　derived by individual industrial and commercial households;

C. income from contracted or leased operation of enterprises or institutions;

D. income from remuneration for personal service;

E. income from author's remuneration;

F. income from royalties;

G. income from interest, dividends and bonuses;

H. income from lease of property;

I. income from transfer of property;

J. contingent income; and

K. other taxable income determined by the finance department of the State Council.

Article 3 Individual income tax rates:

A. income from wages and salaries　shall　be　taxed　at　progressive rates ranging from 5% to 45% (see the appended tax rate schedule).

B. 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% to 35% (see the appended tax rate schedule).

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

D. income from remuneration for personal service shall be taxed at a flat rate of 20%. Where a specific payment of income from remuneration for personal service is excessively high, additional tax can be　levied　at　a rate to be specifically determined by the State Council.

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

A. 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;

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

C. subsidies and allowances received under the State uniform provisions;

D. welfare benefits, survivors pensions and relief payments;

E. insurance indemnities;

F. military severance pay and demobilization pay received by members of the armed forces;

G. settlement pay, severance　pay,　retirement　pay　and　retirement living allowances received by public servants and　workers under State uniform provisions;

H. 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;

I. income　exempt　from　tax　as　stipulated in　the international conventions to which the Chinese Government is a party and in agreements it has entered into; and

J. income　exempt　from　tax　with　the　approval　of　the　finance department of the State Council.

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

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

B. the tax payer suffers major losses caused by disasters;

C. other cases　in　which　reduction is approved by　the finance department of the State Council.　
　
Article 6 The amount of taxable income shall be computed as follows:

A. for income from wages and salaries, a monthly deduction of 800 yuan shall be allowed for expenses and that part in excess of 800 yuan shall be the taxable income;

B. 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;

C. 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;

D. for income from　remuneration for personal service, 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% shall be allowed for expenses. The remaining amount after the deduction shall be the taxable income;

E. 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;

F. 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 have no domicile in China but derive wages　and salaries from sources within China, or have domicile in China　but　derive 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 The individual income taxpayer shall be the income earner, the withholding agent shall be the unit or individual who pay the income. Taxpayers gaining wages or salaries　from　two　or　more　sources or taxpayers without withholding agent, shall declare and pay tax personally.　
　
Article 9 Monthly tax withheld by the withholding agent and　the tax paid by the self-reporting individual, shall　be　paid　to　the State Treasury within the first seven days of the following month and the tax returns filed with the tax authorities.

For income from wages and　salaries,　the　tax　shall　be　levied　on monthly basis. The tax shall be withheld by the withholding agent or　paid by the self-reporting taxpayers to the State　Treasury　within　the　first seven 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 calculated 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 calculated on annual basis and paid in advance in monthly installments. Such payments shall be made within the first seven days after the end　of　each month and the final settlement shall be made within three months after the end of each tax year.　Any　excess　payment　shall　be　refunded and any deficiency repaid.

For income from contracted or leased　operation　of　enterprises　and institutions, the tax payable shall be computed on 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 on shall be paid　in advance 　installments within the first seven 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;　and　excess　payment　shall be refunded and any deficiency repaid.

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% of the amount of tax withheld shall be　paid　to the withholding agent.

Article 12 The　administration　of　collection of Individual　Income　Tax　is carried out according to the provisions in "Law of the People's Republic of China on the Administration of Tax Collection".

Article 13 The detailed rules and regulations for implementation　shall　be 　formulated by the State Council based on this Law.

Article 14 This Law is implemented as of the date of issue.　

Individual Income Tax Rates Table 1
(Applicable to income from Wages and Salaries)

Editor's note: "Monthly taxable income" mentioned in this schedule refers to　the amount remaining from the gross income in a month after the　deduction of 800 yuan or the additional deduction for expenses in accordance with the provision of Article 6 of the Tax Law.

Individual Income Tax Rates Table 2
　 (Applicable to income from production or business　operation　derived　by industrial and commercial house-holds and income from contracted or leased operation of enterprises and institutions)

Editor's 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 provisions of Article 6 of the Tax Law.