(Adopted at the Third Session of the Fifth National People's Congress on September 10, 1980, revised according to the "Decision on the Amendment of the Individual Income Tax Law of the People's Republic of China" taken at the fourth meeting of the Standing Committee of the Eighth National People's Congress on October 31, 1993 to be effective on the January 1, 1994)
Article 1. Individuals who reside in the territory of China for a full year or more no matter having or having not a residence therein shall pay individual income tax according to this law on the income gained within or outside the territory of China.
Individuals who have no residence and do not reside in China or those who have no residence but live in China for less than a year shall pay individual income tax according to this law on the income gained within the territory of China.
Article 2. Individual income tax shall be levied on the following catagories of income:
1. Income from wages and salaries;
2. Income derived from production and business operations by individual households engaging in industry and commerce;
3. Income derived from contracting or leasing operations by enterprises or institutions;
4. Income from remuneration for personal services;
5. Income from remuneration to authors;
6. Income from royalties;
7. Income from interests, dividends and extra dividends;
8. Income from lease of property;
9. Income from transfer of property;
10. Chance income; and
11. Other kinds of income specified as taxable by the
financial department of the State Council.
Article 3. Individual income tax rates:
1. Income from wages and salaries in excess of specified amounts shall be taxed at progressive tax rates ranging from 5% to 45% (for specific rates, see table 1 attached).
2. Income derived from production and business operations by individual households engaging in industry and commerce in excess of specified amounts shall be taxed at progressive rates ranging from 5% to 35% (for specific rates, see table 2 attached)
3. Income derived from remuneration to authors shall be taxed at the proportional tax rate of 20% but with a reduction of 30% of the taxable amount.
4. Income derived from remuneration for personal services shall be taxed at the proportional tax rate of 20%. In case where a single remuneration for the services is extremely high, additional tax may be levied. The specific methods of taxation shall be worked out by State Council separately.
For incomes from royalties, interests, dividends and extra dividends, leasing property, transfer of property, chance income and other incomes, a proportional tax rate of 20% shall be applied.
Article 4. The following categories of incomes shall be exempted from individual income tax:
1. Awards granted by provincial people's governments, ministries and commissions under the State Council and units of the Chinese People's Liberation Army above the division or foreign organizations and international organizations for achievements in science, education, technology, culture, public health, sports and environmental protection.
2. Interests derived from bank savings, State treasury bonds and financial bonds issued by the State.
3. Subsidies and allowances issued in an unified manner by the State.
4. Welfare benefits, pension cost for the disabled and for survivors and relief payments.
5. Insurance proceeds.
6. Military severance pay and decommission or demobilization pay for cadres and soldiers of the armed forces.
7. Resettlement pay, serverance pay, retirement pay, pension retired pay and retirement living allowances for cadres and workers according to State unified stipulations.
8. Income of diplomatic representatives, consulate officials and other people of foreign embassies and consulates in China who enjoy tax concessions according to relevant laws of China.
9. Income exempted from tax as stipulated in the international conventions to which the Chinese government is a party and in agreements it has signed.
10. Income approved as tax-free by the financial department of the State Council.
Article 5. Individual income tax shall be reduced with approval for one of the following cases:
1. Income of disabled persons, lonely old people and families of martyrs.
2. In cases of great losses caused by serious natural disasters.
3. Other cases as approved tax-free by the financial department of the State Council.
Article 6. The amount of each category of taxable income shall be computed as follows.
1. For incomes from wages and salaries, a standard allowance of RMB 800 shall be given for a person and amount in excess of the allowance shall be taxable.
2. Incomes derived by individual households engaging in industry and commerce from their production and business operations shall be taxed at he gross amount in a tax year after deducting costs, expenses and losses.
3. Incomes derived by enterprises and institutions from contracting or leasing operations shall be taxed at the gross amount in a tax year after deducting expenses.
4. Incomes from remuneration for personal services, remuneration to authers, royalties and leasing of property shall be taxed at the part in excess of RMB 800 if the monthly income does not exceed RMB 4, 000 or at the part after deducting 20% as expenses if the monthly income exceeds RMB 4,000.
5. Incomes from transfer of property shall be taxed at the amount after deducting the original value of the property and reasonable expenses.
6. Incomes from interests, dividends and extra dividends shall be taxed at the full amount of each payment.
The part of donations by individuals to education and other public undertakings shall be deducted from the taxable income according to the relevant regulations by the State Council.
Additional expenses shall be deducted for taxpayers who have no residence in the territory of China but derive income from wages and salaries obtained in China and for taxpayers who have residences in China but derive income from wages and salaries obtained outside the territory of China according to their average income levels, living levels and changes of exchange rates. The scope and standards of the deduction shall be formulated by the State Council separately.
Article 7. The amount of individual income tax paid by taxpayers who derive income outside the territory of China may be deducted from their taxable income, but the amount of deduction shall not exceed the taxable amount of the income from outside the territory of China computed according to the provisions of this law.
Article 8. For individual income tax, the income earner shall be the taxpayer and the paying unit or persons shall be the withholding agent. Taxpayers who derive income from wages and salaries from two or more units and/or without a withholding agent are required to file tax returns and pay taxes themselves.
Article 9. The tax withheld each month by a withholding agent and the tax to be paid each mouth by a taxpayer personally filing a returns must be paid to the State treasury with the tax returns being submitted to the tax authorities within the first seven days of the following month.
The taxable wage and salary shall be taxed on the monthly basis and the tax amount payable shall be submitted to the State treasury by the withholding agent or taxpayer personally with the tax returns being submitted to the tax authorities within the first seven days of the following month. The tax amount payable from wages and salaries from certain special trade may be computed on an annual basis and paid in advance in monthly installments. The specific methods of computation and collection shall be worked out separately by the State Council.
The tax amount payable on income derived from production and business operations by individual households engaging in industry and commerce shall be computed on an annual basis and paid in advance in monthly installments by withholding agents within the first seven days of the following month and final settlement shall be made within three months from the end of the tax year, with a refund for any overpayment or a supplemental payment for any deficiency.
The tax amount payable on income derived by enterprises and institutions from contracting or leasing operations shall be computed on annual basis and paid and turned over to the State treasury by withholding agents with tax returns being submitted to the tax authorities within 30 days after the end of a tax year. If the taxpayers derive income from contracting or leasing operations by installments, the tax amount payable shall be paid in advance within seven days after each payment is obtained and final settlement shall be made within three months after a tax year, with a refund for any overpayment or a supplemental payment for any deficiency.
Taxpayers who earn incomes from outside the territory of China must pay the taxes due to the State treasury and submit the tax returns to the tax authorities within 30 days after the end of each year.
Article 10. All categories of income shall be computed in terms of Renminbi. 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 Exchange Control of the People's Republic of China.
Article 11. A service fee of 2% of the amount of the tax withheld shall be paid to the withholding agents.
Article 12. The collection and management of individual income tax shall follow the provisions of the "Provisions of the People's Republic of China on the Collection and Management of Taxes".
Article 13. Rules for the implementation of this law shall be formulated by the State Council.
Article 14. The law shall be enforced as of the date of promulgation.
Table 1 Individual Income Tax Rates
(Applicable to income form wages and salaries)
Grade Monthly Taxable Income Rate (%)
1 Not in excess RMB 500 5
2 In excess of RMB 500 up to RMB2,000 10
3 In excess of RMB 2,000 up to RMB
5,000 15
4 In excess of RMB 5,000 up to RMB
20,000 20
5 In excess of RMB 20,000 up to
RMB 40,000 10
6 In excess of RMB 40,000 up to
RMB 60,000 30
7 In excess of RMB 60.000 up to
RMB 80,000 35
8 In excess of RMB 80,000 up to
RMB 100,000 40
9 In excess of RMB 100,000 45
(Note: The monthly taxable income refers to the amount in excess the standard allowance of expenses of RMB 800 or additional expenses according to the provisions of Article 6 of this law.
Table 2 Individual Income Tax Rates
( Applicable to income derived by individual households engaging in industry and commerce from their production or business operations and income derived by enterprises or institutions from their contracting or leasing operations)
Grade Annual Taxable Income Rate (%)
1 Not in excess of RMB 5,000 5
2 In excess of RMB 5,000 up to RMB
10,000 10
3 In excess of RMB 10,000 up to
RMB 30,000 15
4 In excess of RMB 30,000 up to
RMB 50,000 20
5 In excess of RMB 35
(Note: The annual taxable income refers to the gross income of a tax year after deducting costs, expenses and losses according to provisions of Article 6 of this law. )
Editor/Compiler: Shanghai International Lawyers
