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15 July 2015

Laws & Regulations

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

(Promulgated on Order of the State Council (1994) No. 142 on Jan. 28, 1994)

 

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

 

Article 2 "An Individual having residence in China" mentioned in paragraph one of Article 1 of the Tax Law refers to any individual habitually residing in China on account of domiciliary registration, family ties or economic interests.

 

Article 3 "Having resided in China for one year or more" in paragraph one of Article 1 of the Tax Law refers to the state of residing in China for 365 days in a tax year. The days on a temporary trip away from China shall not be deducted.
 "A temporary trip away from China" in the previous paragraph refers to a trip from China not exceeding 30 days on one trip or the combined number of days on several trips away from China not exceeding 90 days within one tax year.

 

Article 4 "Income in China" in paragraph one and paragraph two of Article 1 of the Tax Law refers to income from sources in China; and "income outside China" refers income from sources outside China.

 

Article 5 The incomes cited below, irrespective of whether the payment thereof is made in China or not, shall be deemed income from sources in China:
1. Income derived from service provided in China on account of appointment, employment or contract,
2. Income from leasing a property to the lessee to be used in China,
3. Income from a transfer of a structure, land use right or other assets in China,
4. Income from the use of all types of franchise in China,
5. Income from interests, dividends and bonuses from companies, enterprises and other economic institutions or individuals in China,

 

Article 6 An individual without a permanent residence but having resided in China for a period ranging from one year to five years and with income from sources abroad may, upon approval by the tax authorities, pay individual income tax on the part paid by companies, enterprises and other economic institutions or individuals established in China; and in the case of having resided in China for more than five years, shall pay individual income tax on all of its income from overseas sources beginning from the sixth year.

 

Article 7 An individual without a permanent residence in China but having resided in China for less than 90 days at a stretch or intermittently within a tax year shall be exempted from individual income tax on that portion of income obtained in China but paid by an overseas employer and not borne by the institutions and other establishments in China of its overseas employer.

 

Article 8 The scope of the categories of individual income tax provided in Article 2 of the Tax Law:
1. "Income from wages and salaries" refers to income from wages, salaries, awards, year-end bonuses, bonus from labor service, allowances and subsidies and other income related to appointments or employment,
2. Income of individual industrial or commercial operators from production or business operations refers t
(1) Income of individual industrial or commercial operators from production or business operations in industry, handicraft, building, transportation and communications, commerce, catering, service, repair and other industries and trades,
(2) Income from running schools, hospitals and clinics and providing consultation and other paid services with approval of the local government and with licenses,
(3) Income of other individuals engaged in the production or business operation of industry or commerce,
(4) Other taxable income of the individual industrial or commercial operators and individuals from production or business operations mentioned above.
3. "Income from operations leased or contracted from enterprises or undertakings" refers to income from business contracted or leased, or subcontracted or sub-leased by individuals, including income in the nature of wage or salary paid every month or from time to time.
4. "Income from remunerations for services" refers to personal income from designing, decoration, installation, industrial drawing, chemical tests, testing and examination, medicine, law, accounting, consultancy, lecturing, news service, broadcasting, translation, finalizing scripts, books and paintings, sculpture, film and television, audio and video recording, theatrical performances, shows, advertising, exhibitions, technical service, intermediate service, brokerage, agency service and other services.
5."Remunerations to authors" refer to income from personal works published in the form of books or in periodicals.
6. "Royalties" refer to income to an individual derived from the provision of the use of patent right, trademark right, copyright, non-patent technology and other franchises; but the income derived from the provision of the use right of copyright does not cover remunerations to authors.
7. "Income from interests, dividends and bonuses" refers to income from the interests, dividends and bonuses of credits and equities an individual owns.
8. "Income from lease of properties" refers to income from leasing out personal buildings, land use right, machinery and equipment, vehicles and vessels and other properties.
9. "Income from transfer of properties" refers to the transfer of personal securities, equities, buildings, land use right, machinery and equipment, vehicles and vessels and other personal properties.
10. "Accidental income" refers to income from awards, prizes, lottery and other accidental income.
In case an income is difficult to be defined of the category for taxation, the tax authorities shall define it.

 

Article 9 Rules for the taxation of personal income derived from transfer of stocks shall be formulated separately by the Ministry of Finance to be approved by the State Council for implementation.

 

Article 10 Personal taxable income shall include that in cash, in kind or in the form of securities. The taxable income in kind shall be assessed at the price indicated on the invoice thereof. In the case of an income in kind without an invoice or the price on the voucher is conspicuously too low, the tax authorities shall assess the taxable income with reference to the market price. In the case of an income in the form of securities, the tax authorities shall assess the taxable amount on the basis of the face value and the market price thereof.

 

Article 11 "Particularly high income from service remuneration" mentioned in paragraph four of Article 3 of the Tax Law refers to one down payment of personal income as remuneration for labor service the taxable amount of which exceeds 20,000 yuan.
The portion of taxable income mentioned in the previous paragraph in excess of 20,000 and up to 50,000 yuan shall be levied an additional income tax of 50% in addition to the proper tax payable assessed in accordance with the Tax Law, and the portion in excess of 50,000 yuan shall be subject to an additional tax rate of 100%.

 

Article 12 "Interests on state bonds" in paragraph two of Article 4 of the Tax Law refer to interests on the state bonds issued by the Ministry of Finance of the People's Republic of China, "interests on financial securities" refer to interests derived from financial securities issued with the approval of the State Council.

 

Article 13 "Allowances and subsidies issued by uniform standards by the state" refer to the special allowances issued in accordance with the stipulations of the State Council and the tax-free allowances and subsidies given to individuals in accordance with the stipulations of the State Council.

 

Article 14 "Welfare benefits" mentioned in paragraph four of Article 4 of the Tax Law refer to the personal living subsidies paid to individuals from the welfare fund laid aside by enterprises, undertakings, government institutions, social organizations and from trade union funds; "relief payments" refer to subsidies to individuals in distress given by the departments of civil affairs of the people's governments.

 

Article 15 "Income of foreign diplomats, consulate officials and other officials of foreign embassies and consulates in China free from individual income tax in accordance with the provisions of the relevant laws of China" in paragraph eight of Article 4 of the Tax Law refers to the tax-free incomes as provided in the "Regulations of the People's Republic of China concerning Diplomatic Privileges and Immunity" and the "Regulations of the People's Republic of China concerning Consulate Privileges and Immunity".

 

Article 16 As for reductions of individual income tax mentioned in Article 5 of the Tax Law, the scope and time limit shall be determined by the people's governments of the provinces, autonomous regions and municipalities directly under the State Council.

 

Article 17 "Costs and expenses" in (2) of paragraph one of Article 6 of the Tax Law refer to the direct expenses paid by a taxpayer in production and business operations, indirect expenses accounted for as costs and marketing, management and financial expenses; by losses, it refers to the non-operating expenses of a taxpayer in production and business operations.
In case a taxpayer fails to provide comprehensive and accurate information for tax payment and to compute the taxable income correctly, the tax authorities shall assess the taxable income.

 

Article 18 The "gross income in a tax year" mentioned in (3) of paragraph one of Article 6 of the Tax Law refers to the income of a taxpayer from the profits and income in the nature of wages or salaries as provided in the contract or lease; and by "deductions for necessary expenses", it refers to a monthly deduction of 800 yuan.

 

Article 19 "Original value of property" mentioned in (5) of paragraph one of Article 6 of the Tax Law refers t
1. As for securities, the buying price thereof and the relevant fees to be paid as provided by regulations,
2. As for buildings, the building costs or the buying price thereof and the expenses involved therein,
3. As for land use right, the amount paid for the use of the land use right, expenses involved in land development and other relevant expenses,
4. As for machinery and equipment, vehicles and vessels, the buying price thereof, transportation expenses, installation expenses and other relevant expenses,
5. As for other properties, to be assessed with reference to the previous rules.
In case a taxpayer fails to provide comprehensive and accurate evidence for the original value of the property so as to correctly compute the original value thereof, the tax authorities shall assess the original value thereof.

 

Article 20 "Reasonable expenses" mentioned in (5) of paragraph one of Article 6 of the Tax Law refer to the expenses to be paid in selling a property in accordance with the relevant regulations.

 

Article 21 "An income" mentioned in (4) and (6) of paragraph one of Article 6 of the Tax Law refers t
1. As for remunerations for services, one down payment as an income and as for the continuous income of the same category, the income in a month shall be assessed as one income.
2. As for remunerations to authors, the income in the form of the payment for each publication shall be assessed as one income.
3. As for income from royalties, the income for one use of a franchise shall be deemed
as one income.
4. As for income from lease of property, the income in a month shall be deemed one income.
5. As for income from interests, dividends and bonuses, each payment thereof shall be one income.
6. As for accidental income, each payment thereof shall be one income.

 

Article 22 The taxable amount of income from transfer of property shall be assessed on the basis of the income from one transfer of property after deductions of the original value thereof and the reasonable expenses involved. 

 

Article 23 As for income of a same item shared by two or more individuals, each individual shall pay income tax on the income each individual has actually received after deduction of the expenses involved.

 

Article 24 "Donations to education and other public welfare undertakings" mentioned in paragraph two of Article 6 of the Tax Law refer to donations made by individuals via social organizations and government institutions to educational and other social welfare undertakings and to regions hit by natural calamities or poverty-stricken regions.
The donation by a taxpayer not exceeding 30% of the taxable income of which a taxpayer has filed tax returns may be deducted from the taxable amount.

 

Article 25 "Having wages or salaries outside China" mentioned in paragraph three of Article 6 of the Tax Law refers to income from wages or salaries of appointments or employment outside China.

 

Article 26 "Additional tax reductions for expenses" mentioned in paragraph three of Article 6 of the Tax Law refer to additional reductions for the amount of expenses provided in Article 28 of these Regulations on top of the reduction of 800 yuan a month for expenses.

 

Article 27 The applicable scope of additional tax reductions for expenses as provided in paragraph three of Article 6 of the Tax Law refers t
1. Foreign nationals working in enterprise with foreign investments and foreign enterprises in China,
2. Foreign experts employed by enterprises, undertakings, social organizations and government institutions in China,
3. Individuals with residence in China but having jobs or being employed drawing wages or salaries outside China,
4. Other individuals defined by the Ministry of Finance.

 

Article 28 The norm for expenses allowing additional tax reductions as provided in paragraph three of Article 6 of the Tax Law is 3,200 yuan.

 

Article 29 Overseas Chinese and Chinese compatriots from Hong Kong, Macao and Taiwan may act with reference to the provisions of Articles 26, 27 and 28 of these Regulations.

 

Article 30 The amount of tax payable shall be assessed separately on incomes in and outside China obtained by an individual with residence in China or without residence in China but having lived in China for one year or more.

 

Article 31 The amount of individual income tax already paid outside China by an individual as mentioned in Article 7 of the Tax Law refers to the actual amount of individual income tax a taxpayer should pay and has paid outside China on the income from a source outside China in accordance with the law of the country or region of the source thereof.

 

Article 32 The tax amount assessed in accordance with the provisions of the Tax Law as mentioned in Article 7 of the Tax Law refers to the tax amount of a taxpayer assessed on the basis of his income obtained from outside China at the applicable tax rates country by country but not item by item after deductions of expenses at the prescribed norms; the aggregate of the tax amounts of different items in one country or region shall be the limit to deductions for the taxable income from that country or region.
In case the amount of individual income tax a taxpayer has already paid in a foreign country or region is lower than the limit to the reductions for the income tax from that country or region assessed in accordance with the rules laid down in the previous paragraph, the taxpayer shall pay the difference in China; in case the tax deduction limit is lower than the tax actually paid outside Chin, the portion in excess shall not be deducted from the tax amount of the current tax year, but may be deducted from the favorable balance of the tax deduction limit for income tax from that country or region in the succeeding years but the period for such deduction shall not exceed five years in succession.

 

Article 33 A taxpayer in applying for tax deduction by the amount of individual income tax he has already paid outside China shall present the comprehensive tax invoices issued by the overseas tax authorities.

 

Article 34 A tax withholder paying a taxable sum to an individual shall withhold the tax payment in accordance with the provisions of the Tax Law and hand the withholding over to the state treasury within the prescribed time limit and keep records for future inspection.
Payment mentioned in the previous paragraph refers to all types of payments in cash, by remittance, transfer of accounts, or in securities, in kind or in other forms.

 

Article 35 Independent taxpayers shall file tax returns and pay tax to the local tax authorities wherefrom his income comes. With income from an overseas source or from two or more domestic sources, a taxpayer may choose one locality to file tax returns and pay tax and shall apply to the original tax authorities for approval for a change of the place for filing tax returns and pay tax.

 

Article 36 A taxpayer in filing tax returns shall be permitted to have his tax payment already withheld in China deducted from the tax amount payable in accordance with the regulations.

 

Article 37 In the case of having two or more incomes as defined in Article 2 of the Tax Law, a taxpayer shall make separate assessments thereof. Income from two or more sources in China as described in paragraphs one, two and three of Article 2 of the Tax Law shall be pooled together under the same item for tax payment.

 

Article 38 The "special industries and trades" mentioned in paragraph two of Article 9 of the Tax Law refer to mining, ocean shipping, ocean fishery and other industries and trades determined by the Ministry of Finance.

 

Article 39 The method of assessment on a yearly basis and advance paid month by month as described in paragraph two of Article 9 of the Tax Law refers to the monthly advance payment of tax payable on the wages or salaries of the workers of special industries and trades and the year-end settlement of tax on the wages or salaries of the whole year assessed within 30 days after the year-end for the tax payable for the year on the basis of the average of the 12 months with the excess payment refunded to and the deficit shall be made up by supplementary payment by the taxpayer.

 

Article 40 The tax payable to be paid into the state treasury by a taxpayer within 30 days after the year end as mentioned in paragraph four of Article 9 of the Tax Law refers to the tax payable on a lump-sum income of a taxpayer from a contracted or leased business operation at the end of the year to be paid into the state treasury within 30 days after the income is received.

 

Article 41 Pursuant to the provisions of Article 10 of the Tax Law, an income originally in a foreign currency shall be assessed for the taxable amount by converting it into RMB at the exchange rate quotation of the People's Bank of China on the last day of the month before the month when the tax payment form is filled. In accordance with the provisions of the Tax Law, in the year-end assessment for tax payment settlement, those incomes in foreign currencies on which the tax payable have been paid by monthly advance payment or by each payment of the income shall not be converted into the local currency for assessment; and the unpaid tax payable in arrears shall be assessed for the taxable amount by converting the foreign currency into RMB at the exchange rate quotation of the People's Bank of China on the last day of the previous tax year.

 

Article 42 The tax authorities in paying commissions to a tax withholder in accordance with the provisions of Article 11 of the Tax Law shall issue to the withholder an income refund notice on a monthly basis and the withholder shall obtain the reimbursement from the state treasury via a designated bank against the income refund notice.

 

Article 43 All forms of tax returns, tax withholder's statements and tax payment certificates of individual income tax shall be designed by the State Administration of Taxation.

 

Article 44 The tax year provided in the Tax Law and these Regulations begins on January 1 and ends on December 31 of the Gregorian calendar.

 

Article 45 Individual income tax shall be assessed and collected as from the tax year of 1994 in accordance with provisions of the Tax Law and these Regulations.

 

Article 46 Interpretation of these Regulations shall rest with the Ministry of Finance jointly with the State Administration of Taxation.

 

Article 47 These Regulations shall come into force as from the day of promulgation. The Provisional Regulations of the State Council of the People's Republic of China concerning Reduction and Exemption of Individual Income Tax on the Wages and Salaries of Foreign People Working in China" which was promulgated by the State Council on August 8, 1987 shall be abrogated therefrom.