The Law of the People’s Republic of China on Individual Income Tax

Decision of the Standing Committee of the National People’s Congress on Amending the Law of the People’s Republic of China on Individual Income Tax
(Adopted at the 21st meeting of the Standing Committee of the 11th National People’s Congress of the People’s Republic of China on June 30, 2011)
 
The Standing Committee of the 11th National People’s Congress decided to revise the Law of the People’s Republic of China on Individual Income Tax at its 21st meeting as follows:
I.          Item 1 of Article 3 shall be revised as: “For the income of wages and salaries, the progressive tax rate in excess of the specific amount is applicable and the rate ranges from 3 percent to 45 percent (the tax rate schedule is attached behind).”
II.       Item 1 of Paragraph 1 of Article 6 shall be revised as: “For the income of wages and salaries, the taxable income amount shall be the balance after deducting 3,500 Yuan from the monthly income.”
III.     “Within the first 7 days” in Article 9 shall be revised as “within the first 15 days”.
IV.    Schedule 1 Individual Income Tax Rates (Applicable to income of wages and salaries) shall be revised as:
Grade   Monthly Taxable Income                           Tax Rate (%)
1       income of 1,500 yuan or less                         3
2       that part of income in excess of 1,500 to 4,500 yuan      10
3       that part of income in excess of 4,500 to 9,000 yuan      20
4       that part of income in excess of 9,000 to 35,000 yuan     25
5       that part of income in excess of 35,000 to 55,000 yuan    30
6       that part of income in excess of 55,000 to 80,000 yuan    35
7       that part of income in excess of 80,000 yuan            45
(Note: The monthly taxable income in this Schedule refers to the balance after deducting 3,500 Yuan and additional expenses from the monthly income pursuant to Article 6 of this Law.)
V.       Schedule 2 Individual Income Tax Rates (Applicable to income gained by private industrial and commercial households from their production or business operation and income gained by enterprises and institutions from contracting or leasing operation) shall be revised as:
Grade   Yearly Taxable Income                           Tax Rate (%)
1       income of 15,000 yuan or less                          5
2       that part of income in excess of 15,000 to 30,000 yuan      10
3       that part of income in excess of 30,000 to 60,000 yuan      20
4       that part of income in excess of 60,000 to 100,000 yuan     30
5       that part of income in excess of 100,000 yuan             35
(Note: The yearly taxable income in this Schedule refers to the balance after deducting costs, expenses and losses from the gross incomes in a tax year. pursuant to Article 6 of this Law.)
This Decision shall be implemented on September 1, 2011.
The Law of the People’s Republic of China on Individual Income Tax shall be re-promulgated after it has been revised according to this Decision.
 
The Law of the People’s Republic of China on Individual Income Tax
 
(Adopted at the 3rd session of 5th National People’s Congress on September 10, 1980
Revised for the first time according to the Decision on Amending the Law of the People’s Republic of China on Individual Income Tax at the 4th meeting of the Standing Committee of the 8th National People’s Congress on October 31, 1993
Revised for the second time according to the Decision on Amending the Law of the People’s Republic of China on Individual Income Tax at the 11th meeting of the Standing Committee of the 9th National People’s Congress on August 30, 1999
Revised for the third time according to the Decision on Amending the Law of the People’s Republic of China on Individual Income Tax at the 18th meeting of the Standing Committee of the 10th National People’s Congress on October 27, 2005
Revised for the fourth time according to the Decision on Amending the Law of the People’s Republic of China on Individual Income Tax at the 28th meeting of the Standing Committee of the 10th National People’s Congress on June 29, 2007
Revised for the fifth time according to the Decision on Amending the Law of the People’s Republic of China on Individual Income Tax at the 31st meeting of the Standing Committee of the 10th National People’s Congress on December 29, 2007
Revised for the sixth time according to the Decision on Amending the Law of the People’s Republic of China on Individual Income Tax at the 21st meeting of the Standing Committee of the 11th National People’s Congress on June 30, 2011)
Article 1 An individual, who has a domicile within the territory of China or who has no domicile but has stayed within the territory of China for one year or more, shall pay individual income tax for his income obtained in and/or outside the territory of China according to the provisions of this Law.
An 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 one year, shall pay individual income tax for his income obtained within the territory of China according to the provisions of this Law.
Article 2 Individual income as listed below shall be subject to payment of individual income tax:
1. Income of wages and salaries;
2. Income of private industrial and commercial households from their production and business operation;
3. Income of enterprises and institutions from contracting or leasing;
4. Income from remuneration for labor services;
5. Income from remuneration for manuscripts;
6. Income from the use of royalties;
7. Income of interests, dividends and bonuses;
8. Income from the lease of properties;
9. Incomes from the transfer of properties;
10. Occasional income; and
11. Other incomes specified as taxable by the financial department of the State Council.
Article 3 Individual income tax rates:
1. For the income of wages and salaries, the progressive tax rate in excess of the specific amount is applicable and the rate ranges from 3 percent to 45 percent (the tax rate schedule is attached behind).
2. For the income of private industrial and commercial households from their production and business operation and income of enterprises and institutions from contracting or leasing, the progressive tax rate in excess of the specific amount ranging from 5 percent to 35 percent is applied (the tax rate schedule is attached behind).
3. For the income from remuneration for manuscripts, the flat tax rate is applicable and the tax rate is 20 percent, and a 30 percent tax deduction shall be applied to the amount of tax payable.
4. For the income from remuneration for labor services, the flat tax rate is applicable and the tax rate is 20 percent. If a single payment of remuneration for labor service is excessively high, an additional proportion of tax may be levied thereon, and the concrete measures shall be formulated by the State Council.
5. For the income from royalties, income from interests, dividends and bonuses, income from the lease of properties, income from the transfer of properties, occasional income and other incomes, the flat tax rate is applicable and the tax rate is 20 percent.
Article 4 Individual incomes as listed below shall be exempted from individual income tax:
1. Prizes in science, education, technology, culture, health, sports and environmental protection, which are 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. Interests gained from treasury bonds and financial bonds issued by the State;
3. Subsidies and allowances distributed pursuant to the unified provisions of the State;
4. Welfare benefits, pensions and relief funds;
5. Insurance compensation;
6. Military severance pay and demobilization pay for military personnel;
7. Settling-in allowance, severance pay, retirement wages, retirement wages for veteran cadres, and living allowances and subsidies for retired veteran cadres, which are distributed to cadres and workers according to the unified provisions of the State;
8. Income of diplomatic representatives, consular officers and other personnel of foreign embassies and consulates in China, which shall be exempt from tax according to the relevant laws of China;
9. Income which shall be exempt from tax in light of the international conventions to which the Chinese Government is a member or agreements which the Chinese Government has signed; and
10. Income which are approved to be exempt from tax by the financial department of the State Council.
Article 5 Upon approval, individual income tax may be reduced under any of the following circumstances:
1. Income of the disabled, the lone old people and the families of martyrs;
2. Those suffering heavy losses resulted from serious natural calamities; or
3. Other tax reductions approved by the financial department of the State Council.
Article 6 The calculation of the taxable income amount:
1. For the income of wages and salaries, the taxable income amount shall be the balance after deducting 3,500 Yuan from the monthly income.
2. For the income of private industrial and commercial households from their production and business operation, the taxable income amount shall be the balance after deducting costs, expenses and losses from the gross incomes in a tax year.
3. For the income of enterprises and institutions from contracting or leasing, the taxable income amount shall be the balance after deducting necessary expenses from the gross income in a tax year.
4. For the income from remuneration for labor services, the income from remuneration for manuscripts, the income from royalties and the income from the lease of properties, the taxable income amount shall be the balance after deducting 800 Yuan if a single payment does not exceed 4,000 Yuan, and be the balance after deducting 20 percent of expenses if a single payment exceeds 4,000 Yuan.
5. For the income from the transfer of properties, the taxable income amount shall be the balance after deducting the original value of the properties and reasonable expenses from proceeds of the transfer of the properties.
6. For the income of interests, dividends and bonuses, occasional income and other incomes, the taxable income amount shall be the amount of income received each time.
The part of income donated by individuals for education and other public welfare careers shall be deducted from the taxable income amount according to the relevant regulations of the State Council.
For a taxpayer who has no domicile within the territory of China but has obtained wage and salary income within the territory of China, or a taxpayer who has a domicile within the territory of China but has obtained wage and salary income abroad, an additional deduction for expenses may be determined in light of his average income level, living standards and the change of exchange rates. And the scope and standards for the additional deduction for expenses shall be formulated by the State Council.
Article 7 For a taxpayer who has obtained incomes outside the territory of China, the amount of individual income tax already paid outside China may be deducted from the payable tax amount. Nevertheless, the deducted amount may not exceed the payable tax amount for the taxpayer's incomes from abroad as calculated according to the provisions of this Law.
Article 8 The income earner shall be the taxpayer of individual income tax, and the unit or person that effects the payment shall be the withholding agent. Where the individual income exceeds the amount as prescribed by the State Council, or a taxpayer gains wage or salary incomes from two or more places or has no withholding agent, or there is any other circumstance as prescribed by the State Council, the taxpayer shall, according to the provisions of the state, handle the tax payment declaration. A withholding agent shall, according to the provisions of the state, make the withholding declaration for all the taxpayers and in full amount.
Article 9 Within the first 15 days of the following month, all tax amounts withheld each month by the withholding agents and all tax amounts paid each month by the taxpayers who file tax returns on their own initiatives shall be turned into the State treasury, and tax returns shall be submitted to the tax authorities.
For the income of wages and salaries, the payable tax amount shall be calculated and collected on a monthly basis, and the withholding agents or taxpayers shall, within the first 15 days of the following month, turn them into the State treasury and submit tax returns to the tax authorities. For the income of wages and salaries in some specific industries, the payable tax amount may be calculated on a yearly basis and be prepaid on a monthly basis, and the concrete measures shall be formulated by the State Council.
For the income of private industrial and commercial households from their production and business operation, the payable tax amount shall be calculated on a yearly basis and be prepaid on a monthly basis. The taxpayers shall make such prepayment within the first 15 days of the following month and shall settle it within three months following the end of a year. And the amount in excess shall be refunded and any amount in deficiency shall be supplemented.
For the income of enterprises and institutions from contracting or leasing, the payable tax amount shall be calculated on a yearly basis, and the taxpayers shall, within 30 days following the end of a year, turn them into the State treasury and submit tax returns to the tax authorities. Where a taxpayer receives incomes in installments within a year from contracting or leasing operation, prepayment shall be made within the first 15 days following the receipt of each installment of income, and the payable tax amount shall be settled within three months following the end of a year. And the amount in excess shall be refunded and any amount in deficiency shall be supplemented.
A taxpayer who gains income outside China shall, within 30 days following the end of a year, turn the payable tax amount into the State treasury and submit the tax return to the tax authority.
Article 10 Renminbi shall be the unit for calculation of all types of incomes. If incomes are in foreign currencies, they shall be converted into Renminbi pursuant to the foreign exchange rates provided for by the State Administration of Foreign Exchanges for tax payment.
Article 11 The handling charge equivalent to 2 percent of the tax amount withheld shall be paid to the withholding agent.
Article 12 The dates of commencement and termination for collecting individual income tax on proceeds from interests on savings and deposits and the date of reduction of such tax, and the collection method shall be provided for by the State Council.
Article 13 The administration on the collection of individual income tax shall be subject to the provisions of the Law of the People's Republic of China on the Administration of Tax Collection.
Article 14 The State Council shall, according to the provisions of this Law, formulate the regulations for its implementation.
Article 15 This Law shall come into force on the day of its promulgation.
 
Schedule 1 Individual Income Tax Rates
(Applicable to income of wages and salaries)
 
Grade   Monthly Taxable Income                           Tax Rate (%)
1       income of 1,500 yuan or less                         3
2       that part of income in excess of 1,500 to 4,500 yuan      10
3       that part of income in excess of 4,500 to 9,000 yuan      20
4       that part of income in excess of 9,000 to 35,000 yuan     25
5       that part of income in excess of 35,000 to 55,000 yuan    30
6       that part of income in excess of 55,000 to 80,000 yuan    35
7       that part of income in excess of 80,000 yuan            45
(Note: The monthly taxable income in this Schedule refers to the balance after deducting 3,500 Yuan and additional expenses from the monthly income pursuant to Article 6 of this Law.)
 
Schedule 2 Individual Income Tax Rates
(Applicable to income gained by private industrial and commercial households from their production or business operation and income gained by enterprises and institutions from contracting or leasing operation)
 
Grade   Yearly Taxable Income                           Tax Rate (%)
1       income of 15,000 yuan or less                         5
2       that part of income in excess of 15,000 to 30,000 yuan      10
3       that part of income in excess of 30,000 to 60,000 yuan      20
4       that part of income in excess of 60,000 to 100,000 yuan     30
5       that part of income in excess of 100,000 yuan             35
(Note: The yearly taxable income in this Schedule refers to the balance after deducting costs, expenses and losses from the gross incomes in a tax year. pursuant to Article 6 of this Law.)