Article 1
This Law is enacted for the purposes of regulating the collection and payment of individual income tax, adjusting the distribution of income, and promoting social equity.
Article 2
Individuals who have domicile within the territory of the People’s Republic of China, or who have no domicile but have resided within the territory of the People’s Republic of China for a total of 183 days or more in a tax year, shall pay individual income tax on income derived from sources both inside and outside the territory of the People’s Republic of China in accordance with this Law.
Individuals who have no domicile within the territory of the People’s Republic of China and who have not resided within the territory of the People’s Republic of China, or who have no domicile and have resided within the territory of the People’s Republic of China for less than 183 days in a tax year, shall pay individual income tax on income derived from sources within the territory of the People’s Republic of China.
Article 3
Individual income tax shall be calculated according to the following tax categories:
(1) comprehensive income, including wages and salaries, remuneration for labor services, author’s remuneration, and royalties;
(2) income from business operations;
(3) income from interest, dividends, and bonuses;
(4) income from property leasing;
(5) income from property transfer; and
(6) contingent income.
Article 4
The following income shall be exempt from individual income tax:
(1) awards for scientific, educational, technological, cultural, health, sports, and environmental protection achievements granted by provincial people’s governments, ministries and commissions under the State Council, units of the People’s Liberation Army at or above the level of a military region, and foreign organizations or international organizations;
(2) interest on treasury bonds and financial bonds issued by the State;
(3) subsidies and allowances granted in accordance with uniform regulations of the State;
(4) welfare payments, pensions, and relief payments;
(5) insurance compensation;
(6) military severance pay, demobilization pay, and retirement pay;
(7) settlement pay, severance pay, retirement pay, and allowances granted to cadres and workers in accordance with uniform regulations of the State; and
(8) other income exempt from individual income tax as prescribed by laws and administrative regulations.
Article 5
Individual income tax rates shall apply progressive tax rates or proportional tax rates depending on the tax category.
Article 6
Comprehensive income shall include wages and salaries, remuneration for labor services, author’s remuneration, and royalties.
Article 7
Comprehensive income shall be calculated on an annual basis. The taxable income of comprehensive income shall be the balance after deducting expenses, special deductions, special additional deductions, and other deductions as prescribed by laws and regulations from the gross income.
Article 8
The standard deduction for comprehensive income shall be RMB 60,000 per year.
Article 9
Special deductions shall include basic pension insurance, basic medical insurance, unemployment insurance, and housing provident fund contributions paid by individuals in accordance with the law.
Article 10
Special additional deductions shall include children’s education, continuing education, medical expenses for serious illnesses, housing loan interest, housing rent, and support for elderly persons.
Article 11
The specific scope, standards, and implementation measures for special additional deductions shall be formulated by the competent departments under the State Council.
Article 12
For comprehensive income, a progressive tax rate ranging from 3 percent to 45 percent shall be applied.
Article 13
Taxpayers may choose to have their comprehensive income withheld or prepaid by withholding agents on a monthly basis, or may settle their comprehensive income tax on an annual basis in accordance with the provisions of the Individual Income Tax Law of the People’s Republic of China .
Part II Deductions, Tax Rates, and Calculation Methods
Article 14
Income from business operations shall be calculated on an annual basis. The taxable income shall be the balance after deducting costs, expenses, and losses from the gross income.
Article 15
Income from interest, dividends, and bonuses, income from property leasing, income from property transfer, and contingent income shall be calculated separately and taxed in accordance with the provisions of this Law.
Article 16
Where an individual obtains taxable income, the payer of such income shall withhold the tax in accordance with the law.
Article 17
Where an individual has no withholding agent, or where the withholding agent fails to withhold tax, the taxpayer shall file the tax return and pay the tax in accordance with the law.
Article 18
The State shall establish and improve an individual income tax information system, and strengthen tax administration through information sharing.
Article 19
Where an individual obtains income from wages and salaries, the taxable income shall be calculated after deducting expenses, special deductions, special additional deductions, and other deductions as prescribed by laws and regulations.
Article 20
For remuneration for labor services, author’s remuneration, and royalties, the taxable income shall be calculated in accordance with the relevant provisions of this Law.
Article 21
For income from property leasing, the taxable income shall be the balance after deducting reasonable expenses from the gross income.
Article 22
For income from property transfer, the taxable income shall be the balance after deducting the original value of the property and reasonable expenses from the gross income.
Article 23
For contingent income, the taxable income shall be the full amount of income obtained.
Article 24
For income from business operations, a progressive tax rate ranging from 5 percent to 35 percent shall be applied.
Article 25
For income from interest, dividends, and bonuses, a proportional tax rate of 20 percent shall be applied.
Article 26
For income from property leasing, a proportional tax rate of 20 percent shall be applied.
Article 27
For income from property transfer, a proportional tax rate of 20 percent shall be applied.
Article 28
For contingent income, a proportional tax rate of 20 percent shall be applied.
Article 29
Where an individual has paid income tax outside the territory of the People’s Republic of China on income derived from sources outside the territory, the amount of tax paid may be credited against the individual income tax payable in accordance with the relevant provisions of the State.
Article 30
Where an individual obtains taxable income from two or more sources, the taxable income shall be calculated separately in accordance with the tax category and aggregated where required by this Law.
Article 31
Where an individual incurs losses from business operations, such losses may be carried forward to subsequent tax years and offset against taxable income in accordance with the relevant provisions of the State.
Article 32
Where an individual enjoys tax reductions or exemptions in accordance with the law, the tax reductions or exemptions shall be implemented in accordance with the relevant provisions of the State.
Article 33
The specific measures for tax reductions and exemptions shall be formulated by the competent departments under the State Council.
Article 34
Where an individual has difficulty in paying individual income tax due to special circumstances, tax reduction or exemption may be granted upon approval in accordance with the law.
Article 35
Where an individual obtains taxable income and the amount of tax withheld is inconsistent with the tax payable, the difference shall be settled through annual reconciliation.
Article 36
The annual reconciliation of comprehensive income shall be conducted in accordance with the relevant provisions of the State.
Disclaimer: The regulation is translated by FDIChina for reference only. There may be different interpretations of the Chinese version.