Individual Income Tax Law of the People's Republic of China (Revised in 2018)
Order of the President of the People's Republic of China No.9 August 31, 2018
(Adopted by the 3rd Session of the Fifth National People's Congress on September 10, 1980;
amended for the first time in accordance with the Decision on Amending the Individual Income Tax Law of the People's Republic of China adopted at the 4th Session of the Standing Committee of the Eighth National People's Congress on October 31, 1993;
amended for the second time in accordance with the Decision on Amending the Individual Income Tax Law of the People's Republic of China adopted at the 11th Session of the Standing Committee of the 9th National People's Congress on August 30, 1999;
amended for the third time in accordance with the Decision on Amending the Individual Income Tax Law of the People's Republic of China adopted at the 18th Session of the Standing Committee of the Tenth National People's Congress on October 27, 2005;
amended for the fourth time in accordance with the Decision on Amending the Individual Income Tax Law of the People's Republic of China adopted at the 28th Session of the Standing Committee of the 10th National People's Congress on June 29, 2007;
amended for the fifth time in accordance with the Decision on Amending the Individual Income Tax Law of the People's Republic of China adopted at the 31st Session of the Standing Committee of the 10th National People's Congress on December 29, 2007;
amended for the sixth time in accordance with the Decision on Amending the Individual Income Tax Law of the People's Republic of China adopted at the 31st Session of the Standing Committee of the 10th National People's Congress on June 30, 2011;
Amended for the seventh time in accordance with the Decision on Amending the Individual Income Tax Law of the People's Republic of China adopted at the 5th Session of the Standing Committee of the 13th National People's Congress on August 31, 2018.)
Article 1 Any individual who has a domicile within the territory of China or who has no domicile but has stayed within the territory of China for an aggregate of 183 days or longer in a single tax year is considered as a resident individual. A resident individual shall pay individual income tax for any income sourced within and outside the territory of China according to the provisions of this Law.
Any individual who has no domicile and does not stay within the territory of China or who has no domicile but has stayed within the territory of China for less than 183 days in aggregate is considered as a non-resident individual. A non-resident individual shall pay individual income tax for any income sourced within the territory of China according to the provisions of this Law.
A tax year begins on January 1 and ends on December 31 under the Gregorian Calendar.
Article 2 The following individual income shall be subject to individual income tax:
1. Wage and salary income;
2. Labor remuneration;
3. Author's remuneration;
4. Royalties;
5. Business income;
6. Interests, dividends and bonuses;
7. Income derived from leasing of property;
8. Income derived from transfer of property;
9. Occasional income.
For the income set out in Item 1 through Item 4 of the preceding paragraph (hereinafter referred to as the "general income"), the individual income tax shall be calculated on a consolidated basis by the tax year for resident individuals, but on an item-by-item basis by month or by time for non-resident individuals. For the income set out in Item 5 through Article 9, received by taxpayers, the individual income tax shall be calculated respectively in accordance with the provisions of this Law.
Article 3 Individual income tax rates:
1. For general income, progressive tax rates ranging from 3% to 45% shall apply (see the attached tax rate schedule);
2. For business income, progressive tax rates ranging from 5% to 35% shall apply (see the attached tax rate schedule); and
3. For interest, dividends, bonuses, income derived from leasing of property, income derived from transfer of property and occasional income, a proportional tax rate of 20% shall apply.
Article 4 Individual incomes set forth below shall be exempt from individual income tax:
1. Prizes in science, education, technology, culture, health, sports and environmental protection awarded by provincial people's governments, ministries and commissions under the State Council and units of the People's Liberation Army at or above the army level, as well as by foreign organizations and international organizations;
2. Interest accruing from treasury bonds and financial bonds issued by the State;
3. Subsidies and allowances distributed according to the unified regulations of the State;
4. Welfare benefits, pensions for the disabled or for the family of the deceased and relief payment;
5. Insurance compensation;
6. Military severance pay, demobilization pay and discharge pay for military personnel;
7. Settling-in allowance, severance pay, basic pensions or retirement payments or payments for veteran cadres, and living allowances and subsidies for retired veteran cadres distributed to cadres and workers according to the unified regulations of the State;
8. Incomes of diplomatic representatives, consular officers and other personnel of foreign embassies and consulates in China, which, pursuant to the provisions of relevant laws, shall be exempt from tax;
9. Incomes which shall be exempt from tax under the international conventions to which the Chinese Government is a member or agreements which the Chinese Government has signed; and
10. Other income exempt from tax as stipulated by the State Council.
Policies concerning the other income exempt from tax as mentioned in Item 10 of the preceding paragraph shall be submitted by the State Council to the Standing Committee of the National People's Congress for record-filing.
Article 5 Value-added tax may be collected at a reduced rate under any of the following circumstances. The degree of tax reduction and the validity period thereof shall be determined by the people's government of a province, autonomous region or municipality directly under the Central Government, and be submitted to the standing committee of the people's congress at the same level for record-filing:
1. Where the income is paid to the disabled, the elderly living alone, and family members of martyrs; or
2. Where the taxpayer suffers huge losses as a result of natural disaster.
The State Council may specify other circumstances for tax reduction and require them to be submitted to the Standing Committee of the National People's Congress for record-filing.
Article 6 Calculation of taxable income:
1. For general income obtained by a resident individual, the taxable income shall be the remainder after deducting the CNY60,000 quota, special deductions, special extra deductions, and other deductions specified according to the law from his or her gross income obtained in a single tax year.
2. For wage and salary income received by non-resident individuals, the taxable income shall be the remainder after deducting the CNY5,000 quota from the gross monthly income; for income derived from labor services, author's remuneration, and royalty income, the taxable income shall be the amount received each time.
3. For business income, the taxable income shall be the remainder after deducting costs, expenses and losses from the gross income obtained in a single tax year.
4. For income derived from leasing of property, the taxable income shall be the remainder after deducting the CNY800 quota, if a single payment does not exceed CNY4,000, and be the remainder after deducting 20 percent for expenses if a single payment exceeds CNY4,000.
5. For income derived from transfer of property, the taxable income shall be the remainder after deducting the original value of the property and reasonable expenses from the proceeds of transfer of property.
6. For interest, dividends, bonuses and occasional income, the taxable income shall be the amount received each time.
For labor remuneration, author's remuneration and royalties, the taxable income shall be the balance of the amount received minus 20% thereof as the cost. For the author's remuneration, the taxable income in essence shall be 70 percent of the said balance.
The part of income donated by an individual for education, poverty alleviation, financial assistance or other public welfare causes, may be deducted from his or her taxable income, to the extent of 30% of the taxable income declared by such taxpayer; where other policies of the State Council provide that donations to public welfare causes may be deducted in full before the calculation of income tax, such policies shall prevail.
Among the special deductions mentioned in the first item under the first paragraph of this article are contributions made for social insurance, including the basic pension insurance, basic medical insurance and unemployment insurance, and housing provident funds paid by resident individuals, to the extent of the quota and standard provided by the State; special extra deductions cover expenses for children's education, continuing education, medical expenses for serious diseases, interest of mortgages or house rents, elderly care expenses, etc.; the specific quota, standard and implementing steps will be determined by the State Council and be submitted to the Standing Committee of the National People's Congress for record-filing.
Article 7 For the foreign-source income received by an individual, the amount of individual income tax he or she has paid outside the territory of China may be offset against his or her taxable income, but the offset amount shall not be higher than the taxable income calculated under the method provided herein on such taxpayer's foreign-source income.
Article 8 Under any of the following circumstances, the tax authority shall have the right to make tax adjustments based on reasonable methods,
1. Business that is not carried out under the arm's length principle between an individual and his or her affiliated party results in the lower amount of the individual's or his or her affiliated party's taxable income, without any justifiable causes;
2. An enterprise established in a country (region) where the actual tax is obviously lower, which is controlled by a resident individual or jointly controlled by a resident individual and a resident enterprise, does not distribute profits that belong to such resident individual or distributes such profits in a smaller amount, without reasonable business needs;
3. An individual makes other arrangements, without justifiable business purposes, to seek unjustified tax benefits.
Where it is required to make additional tax payments due to tax adjustments made by the tax authority in accordance with the provisions of the preceding paragraph, additional tax payments due shall be made, plus the interest thereon.
Article 9 The income earner shall be the taxpayer of individual income tax and the unit or person that effects the income payment shall be the withholding agent.
Where a taxpayer has the Chinese Resident Identity Card number, his or her Chinese Resident Identity Card number shall be the taxpayer identification number; otherwise, the tax authority will allocate him or her a taxpayer identification number. A taxpayer shall provide his or her taxpayer identification number to the withholding agent when it withholds and remits the tax due.
Article 10 Under any of the following circumstances, a taxpayer shall file a tax return in accordance with the law:
1. Where the taxpayer needs to handle the final settlement of tax due on his or her general income;
2. Where the taxpayer receives taxable income, but there is no withholding agent;
3. Where the taxpayer receives taxable income, but the withholding agent does not withhold and remit the tax due;
4. Where the taxpayer receives foreign-sourced income;
5. Where the taxpayer deregisters his or her Chinese nationality as a result of emigration;
6. Where a non-resident receives wage and salary income from two or more sources within the territory of China; or
7. Other circumstances specified by the State Council.
The withholding agent shall, according to the provisions of the state, make the withholding declaration for all taxpayers and in full amount, and provide each taxpayer with information about his or individual income and the amount of withheld tax.
Article 11 The general income received by a resident individual is taxed for individual income tax purposes on a yearly basis; where there is a withholding agent, the agent shall withhold and remit the tax in advance on a monthly or timely basis; where a taxpayer needs to handle the final settlement of individual income tax on his or her general income, he or she shall handle such final settlement between March 1 and June 30 of the year after the year the income is received. Measures for advance tax withholding and remittance will be formulated by the competent tax authority of the State Council.
Where a resident individual provides the withholding agent with information about special extra deductions, the withholding agent shall deduct relevant items from his or her taxable income when it withholds and remits the tax in advance every month, but shall not refuse the deduction.
For wage and salary income, labor remuneration, author's remuneration, and royalties received by a non-resident individual, the withholding agent, if any, shall withhold and remit the tax due on a monthly or timely basis for the non-resident individual, and such individual does not have to handle the final settlement of individual income tax.
Article 12 Business income received by a taxpayer is taxed for individual income tax purposes on a yearly basis, and the taxpayer shall file a tax return for such business income with the tax authority within 15 days after the end of each month or quarter, and make advance tax payments; the taxpayer needs to handle the final settlement of tax by March 31 of the year after the year when such income is received.
The interest, dividends, bonuses, income from lease of property, income from transfer of property, and occasional income received by a taxpayer is taxed for individual income tax purposes on a monthly or timely basis; the withholding agent, if any, shall withhold and remit the tax due on a monthly or timely basis.
Article 13 Where there is no withholding agent for the taxable income received by a taxpayer, he or she shall file a tax return with the tax authority within the first 15 days of the month after the month the income is received, and make the tax payment.
Where the withholding agent does not withhold and remit the tax due on the taxable income received by a taxpayer, the taxpayer shall pay the tax due by June 30 of the year after the year the income is received; where the tax authority notifies him or her to pay the tax due within designated time limits, he or she shall pay the tax due within such time limits.
A resident individual shall file a tax return for income he or she has received from outside the territory of China, between March 1 and June 30 of the year after the year such income is received.
Where a non-resident individual receives wage and salary income from two or more sources in China, he or she shall file a tax return within the first 15 days of the month after the month the income is received.
Where a taxpayer intends to deregister his or her Chinese nationality due to emigration, he or she shall handle the final settlement of tax before the deregistration of his or her Chinese nationality.
Article 14 A withholding agent shall turn all tax it has withheld in advance or on a commission basis each month or each time, over to the State treasury, within the first 15 days of the next month, and file tax returns on the withheld individual income tax with the tax authority.
Where a taxpayer handles the final settlement for tax refund purposes or his or her withholding agent handles the same for him or her, the tax authority shall handle tax refund affairs in accordance with the applicable provisions for state treasury administration, after it has completed the examination.
Article 15 Public security organs, the People's Bank of China, financial regulators, and other related departments shall assist tax authorities in verifying taxpayers' identities and bank accounts. Departments of education, health, medical care security, civil affairs, human resources and social security, housing and urban-rural development, public security, people's banks, financial regulation, etc. shall provide tax authorities with information on special extra deductions of taxpayers, such as children's education, continuing education, medical expenses for serious diseases, mortgage interest, house rents, and elderly care expenses.
Where an individual transfers his or her real property, the tax authority shall verify the payable individual income tax according to the real property registration information and other relevant information, and the real property registry shall verify the tax payment certificate for the individual income tax in connection with the transfer of such real property when it handles the registration for such transfer. Where an individual deals with the alteration registration for the transfer of equities, the registry of market players shall verify the tax payment certificate for the individual income tax in connection with such equity transaction.
Relevant departments shall incorporate the efforts of taxpayers and withholding agents in abiding by this Law into the credit information system, and award joint incentives or impose joint disciplinary actions.
Article 16 All types of income shall be calculated with RMB as the unit. Where the received income is paid in a foreign currency other than RMB, it shall be converted into the RMB amount at the RMB central parity and then be taxed.
Article 17 A service fee equivalent to 2 percent of the amount of tax withheld shall be paid to the withholding agent.
Article 18 The time to start or stop levying individual income tax on interest income from saving deposits, the reduced taxation, and specific measures thereof, will be stipulated by the State Council and be submitted to the Standing Committee of the National People's Congress for record-filing.
Article 19 Where any taxpayers, withholding agents and tax authorities, as well as employees or functionaries thereof, violate the provisions of this Law, their legal liability shall be investigated and pursued in accordance with the Law of the People's Republic of China on the Administration of Tax Collection and applicable laws and regulations.
Article 20 The administration of individual income tax collection shall be subject to this Law and the Law of the People's Republic of China on the Administration of Tax Collection.
Article 21 The State Council shall, pursuant to the provisions of this Law, formulate the regulation for its implementation.
Article 22 This Law shall enter into force on the day of its promulgation.
附件:
Table 1 Individual Income Tax Rates (Applicable to General Income)
Table 2 Individual Income Tax Rates (Applicable to Business Income)
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