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Order of the President of the People's
Republic of China
No. 44
The 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 18th Session of the Standing Committee
of the Tenth National People's Congress of the People's Republic of China on
October 27, 2005, is hereby promulgated and shall come into force as of January
01, 2006.
President of the People's Republic of China: Hu
Jintao
October 27, 2005
Law of the People's Republic of China on
Individual Income Tax
(Adopted at the 3rd Session of the Fifth
National People's Congress on September 10, 1980, revised for the first time in
accordance with the Decision on Amending the Law of the People's Republic of
China on Individual Income Tax adopted at the 4th Session of the Standing
Committee of the Eighth National People's Congress on October 31, 1993, revised
for the second time in accordance with the Decision on Amending the Law of the
People's Republic of China on Individual Income Tax adopted at the 11th Session
of the Standing Committee of the Ninth National People's Congress on August 30,
1999, and revised for the third time in accordance with the Decision on Amending
the Law of the People's Republic of China on Individual Income Tax adopted at
the 18th Session of the Standing Committee of the Tenth National People's
Congress on October 27, 2005 )
Article 1 Individuals who have domiciles
within the territory of China or who have no domiciles but have resided in the
territory of China for one year or more shall pay individual income tax in
accordance with the provisions of this Law for their income gained within and/or
outside the territory of China.
Individuals who have no domiciles and do not
reside in the territory of China or who have no domiciles but have resided in
the territory of China for less than one year shall, in accordance with the
provisions of this Law, pay individual income tax for their income gained within
the territory of China.
Article 2 Individual income tax shall be paid
on the following categories of individual income:
(1) Income from wages and salaries;
(2) Income of self-employed industrial and
commercial households from productions or business operations;
(3) Income from contracted or leased operation of
enterprises or institutions;
(4) Income from remuneration for labor services;
(5) Income from author's remuneration;
(6) Income from royalties;
(7) Income from interests, dividends and bonuses;
(8) Income from lease of property;
(9) Income from transfer of property;
(10) Incidental income; and
(11) Income from other sources specified as taxable
by the department of finance under the State Council.
Article 3 Individual income tax rates:
(1) For income from wages and salaries in excess of
the specified amounts, the progressive rates ranging from 5 percent to 45
percent shall apply (with the tax rate schedule attached hereinafter).
(2) For income of self-employed industrial and
commercial households gained from productions or business operations and income
of enterprises or institutions from contracted or leased operations that are in
excess of the specified amounts, the progressive rates ranging from 5 percent to
35 percent shall apply (with the tax rate schedule attached hereinafter).
(3) For income from author's remuneration, a flat
rate at 20 percent shall apply, and the amount of tax payable shall, however, be
reduced by 30 percent.
(4) For income from remuneration for labor services,
a flat rate at 20 percent shall apply. If a single payment of remuneration for
labor services is extremely high, an additive tax may be levied thereon, where
the specific measures shall be prescribed by the State Council.
(5) For income from royalties, interests, dividends,
bonuses, lease of property or transfer of property, incidental income or income
from other sources, a flat rate at 20 percent, shall apply.
Article 4 The following categories of individual
income shall be exempted from individual income tax:
(1) Awards for achievements in such fields as
science, education, technology, culture, public health, sports and environmental
protection granted by people's governments at the provincial level, ministries
and commissions under the State Council, units of the Chinese People's
Liberation Army at or above the corps level, or by foreign or international
organizations;
(2) Interest accrued from national debts and
financial debentures issued by the State;
(3) Subsidies and allowances distributed according
to the uniform regulations of the State;
(4) Welfare benefits, pensions and relief payments;
(5) Insurance indemnities;
(6) Military severance pay and demobilization pay
for military personnel;
(7) Settlement pay, severance pay, retirement pay
and retirement living allowances received by public servants and workers under
the State uniform provisions;
(8) Income, exempted from tax pursuant to relevant
laws of China, of diplomatic representatives, consular officers and other
personnel of foreign embassies and consulates in China;
(9) Income exempted from tax as stipulated in
international conventions to which the Chinese Government has acceded or in
agreements the Chinese Government has signed; and
(10) Income exempted from tax upon approval by the
department of finance under the State Council.
Article 5 In any of the following circumstances,
individual income tax may be reduced upon approval:
(1) Income of the disabled, the aged without
families, or the family members of martyrs;
(2) Those suffering heavy losses from serious
natural disasters; or
(3) Other tax reductions upon approval by the
department of finance under the State Council.
Article 6 Calculation of the amount of taxable
income:
(1) For income from wages and salaries, the amount
of taxable income shall be the balance after deducting 1,600 Yuan for expenses
from a monthly income;
(2) For income of self-employed industrial and
commercial households gained from productions or business operations, the amount
of taxable income shall be the balance after deducting costs, expenses and
losses from the gross income in a tax year;
(3) For income from contracted or leased operations
of enterprises or institutions, the amount of taxable income shall be the
balance after deducting necessary expenses from the gross income in a tax
year;
(4) For income from remuneration for labor services,
author's remuneration, royalties and lease of property, the amount of taxable
income shall be the balance after deducting 800 Yuan for expenses from the
amount received in a single payment not exceeding 4,000 Yuan; or after deducting
20 percent from the amount in excess of 4,000 Yuan in a single payment;
(5) For income from transfer of property, the amount
of taxable income shall be the balance after deducting the original value of the
property and the reasonable expenses from the proceeds gained from such
transfer; and
(6) For income from interests, dividends and
bonuses, incidental income and income from other sources, the amount of taxable
income shall be the full income received in each payment.
The part of individual income donated to
educational and other public welfare undertakings shall be deducted from the
amount of taxable income in accordance with the relevant regulations of the
State Council.
For taxpayers who have no domiciles within the
territory of China but gain wages or salaries within the territory of China, or
who have domiciles in China but gain wages or salaries outside China, an
additional deduction of expenses may be determined on the basis of their average
income level, living standard and the change in exchange rates. The applicable
scope and standard of additional deduction of expenses shall be prescribed by
the State Council.
Article 7 For income gained by taxpayers from
outside China, the amount of individual income tax already paid outside China
may be deducted from the amount of tax payable. The amount to be deducted,
however, shall not exceed the amount of tax payable as calculated according to
the provisions of this Law on income gained by the taxpayers from outside
China.
Article 8 The income earner shall be the taxpayer
of individual income tax, and the payment entity or individual shall be the
withholding agent. If a taxpayer's individual income exceeds the amount
specified by the State Council, or a taxpayer receives wages or salaries from
two or more sources, or there is no withholding agent, or it is subject to other
circumstances specified by the State Council, the taxpayer shall file tax
returns and pay taxes in accordance with State regulations. The withholding
agent shall, in accordance with State regulations, file the withholding taxes of
all taxpayers in full amount.
Article 9 The tax withheld each month by a
withholding agent and the tax paid each month by a taxpayer personally filing
tax returns shall be turned in to the State Treasury within the first seven days
of the following month and the tax returns shall be submitted to the tax
authorities.
The tax payable on income from wages and
salaries shall be computed and collected on a monthly basis and turned in by the
withholding agents or by the taxpayers to the State Treasury within the first
seven days of the following month and the tax returns shall be submitted to the
tax authorities. The tax payable on income from wages and salaries for specified
industries may be computed on a yearly basis and be prepaid by monthly
installments, where the specific measures shall be formulated by the State
Council.
The tax payable on income of self-employed
industrial and commercial households gained from productions or business
operations shall be computed on a yearly basis and be prepaid by monthly
installments. Such payment shall be prepaid by taxpayers within the first seven
days of the following month, and the final settlement shall be made within three
months following the end of each year; any excess payment shall be refunded and
any deficiency repaid.
The tax payable on income from contracted or
leased operations of enterprises and institutions shall be computed on a yearly
basis and turned in by taxpayers to the State Treasury within 30 days following
the end of each year and the tax returns shall be submitted to the tax
authorities. Taxpayers who gain income from contracted or leased operations in
installments during a year shall prepay taxes within the first seven days after
each installment, and the final settlement shall be made within three months
following the end of each year; any excess payment shall be refunded and any
deficiency repaid.
Taxpayers who earn income outside China shall
pay tax to the State Treasury within 30 days following the end of each year and
submit the tax returns to the tax authorities.
Article 10 All categories of income shall be
computed in terms of Renminbi (RMB). Income in foreign currency shall be taxed
on the equivalent amount converted into Renminbi according to the foreign
exchange rate quoted by the State administration of foreign exchanges.
Article 11 A service fee equivalent to 2 percent
of the amount of tax withheld shall be paid to the withholding agent.
Article 12 The time to start collecting individual
income tax on interest income from savings deposits and the measures thereof
shall be prescribed by the State Council.
Article 13 The administration of individual income
tax collection shall be governed by the provisions of the Law of the People's
Republic of China on the Administration of Tax Collection.
Article 14 The State Council shall, in accordance
with this Law, formulate regulations for its implementation.
Article 15 This Law shall come into effect as of
the date of its promulgation. | 
