Regulation on the Implementation of the Individual Income Tax Law of the People's Republic of China (Amendment 2011)

(Promulgated by the order No.142 of the State Council of the People’s Republic of China on January 28, 1994, amended for the first time in accordance with the Decision of the State Council on Amending the Regulation on the Implementation of the Individual Income Tax Law of the People’s Republic of China on December 19, 2005, amended for the second time in accordance with the Decision of the State Council on Amending the Regulation on the Implementation of the Individual Income Tax Law of the People’s Republic of China on February 18,2008 and amended for the third time in accordance with the Decision of the State Council on Amending the Regulation on the Implementation of the Individual Income Tax Law of the People’s Republic of China on July 19,2011 )

Article 1 The rules are formulated in accordance with the Individual Income Tax Law of the People's Republic of China (hereinafter referred to as the "Tax Law").

Article 2 Individuals who reside in the territory of China mentioned in Section 1 of Article 1 of the Tax Law mean individuals who have habitually resided in China because of household registration, family or economic involvements.

Article 3 Individuals who stay in China for a full year mentioned in Section 1 of Article 1 of the Tax Law mean individuals who have stayed in China for 365 days in a tax year. Days for temporary leaves from Chinese territory shall be included in the calculation of the total days.

The temporary leaves from the territory of China mentioned above mean one time leave of not exceeding 30 days or multiple leaves of not exceeding of a total of 90 days from the territory of China within a tax year.

Article 4 Income derived from within the territory of China mentioned in Section 1 and 2 of Article 1 of the Tax Law means income derived from sources within the territory of China; income derived outside China means income derived from sources outside the territory of China.

Article 5 The following categories of income, regardless whether or not payments be made within China, shall be considered
income derived from sources within the territory of China:
(1) Income derived from on job, employed or contracted labor service performed within the territory of China;
(2) Income derived from leasing of property to others for use within the territory of China;
(3) Income derived from transfer of buildings, land use rights or other property within the territory of China;
(4) Income derived from granting of various franchises to be used within the territory of China; and
(5) Income derived from interests, dividends and extra dividends from companies, enterprises and other economic organizations or individuals within the territory of China.

Article 6 Individuals who have no residence in China but have stayed in China for over one year but not exceeding five years, with approval of the tax authorities, shall pay individual income tax on that part of their income derived from the companies, enterprises, other economic organizations or individuals within the territory of China; individuals who have stayed in China for more than five years shall pay individual income tax on all their income derived outside China from the sixth year.

Article 7 Individuals who have no residence in China but who have stayed in China continuously or accumulatively not exceeding 90 days in a tax year shall be exempted from tax on the part of their income derived within the territory of China but paid by employers outside China and the payment not coming from the latter’s institutions or places within the territory of China.

Article 8 The scope of the categories of income mentioned in Article 2 of the Tax Law is as follows:
(1) Income derived from wages and salaries means income from wages, salaries, awards, year-end extra dividends, labor dividends, allowances, subsidies and other remunerations from their job or other income related with their employment;
(2) Income derived from production and business operations by individual households engaging in industry and commerce means:
1. Income derived from production and business operations by individual households engaging in manufacturing, handicraft, construction, communications and transportation, commerce, catering, service, repair and other industries;
2. Income derived by individual from running school, medical service, consultation and other paid services upon approval or license
granted by related government departments;
3. Income derived from production and business operations by other individuals; and
4. Other taxable income related with production and business operations obtained by individual households engaging in industry and commerce and individuals mentioned above.
(3) Income derived from contracting or leasing operations of enterprises and institutions means income obtained by individuals from operations of contracting, leasing, subcontracting and transfer of leasing rights, including the monthly or individual payments of wage and salary nature.
(4) Income derived from labor services means income derived from designing, decoration, installation, drafting, chemical examination, testing, medical practice, law practice, accounting, consulting, lecturing, news reporting, broadcasting, translating, proof-reading, calligraphy and painting, sculpture, films, audio and video recording, performing, advertisement, exhibition, technical service, go-between
service, brokerage, commissioned service and other labor services.
(5) Income derived from remuneration to authors means income derived from written works of individuals after published in books, newspapers or journals.
(6) Income derived from royalties means income derived from providing and assigning patent rights, copyrights, rights to use proprietary technology and other rights; income from providing copyrights excludes remuneration to authors.
(7) Income derived from interests, dividends and extra dividends means income derived from interests, dividends and extra dividends from the ownership of bonds and stocks.
(8) Income derived from leasing of property means income derived by individuals from leasing of their buildings, land use rights, machinery and equipment, motor vehicles and ships and other property.
(9) Income derived from transfer of property means income derived by individuals from transfer of securities, stocks, buildings, land use rights, machinery and equipment, motor vehicles and ships and other property.
(10) Chance income means income derived by individuals from rewards, winning prize in lotteries and other windfalls. When it is difficult to define the category of taxable individual income, the tax authorities shall make the determination.

Article 9 The procedures for levy of individual income tax on gains from transfer of stocks shall be formulated separately by the Ministry of Finance and implemented after approval of the State Council.

Article 10 Individual income includes income in cash, income in kind, income in negotiable securities and income in economic benefits of other forms. For income in kind, the taxable amount of income shall be calculated on the price provided by certificate; when there is no certificate for income in kind or the price provided by certificate is obviously low, the taxable amount of income shall be determined based on the market price. For income in negotiable securities, the taxable amount of income shall be determined on par value and market price. For income in economic benefits of other forms, the taxable amount of income shall be determined based on the market price.

Article 11 An extremely high single payment for labor services means income derived by individuals from labor services with taxable remuneration exceeding RMB20,000 in a single payment.

That part of income exceeding RMB20,000 but not exceeding RMB50, 000 shall be levied an additional tax equal to 50% of the paid tax stipulated by the Tax Law; and the part exceeding RMB50,000 shall be levied an addition tax equal to 100% of the paid tax stipulated by the Tax Law.

Article 12 Interests derived from State treasury bonds issued by the State mentioned in Paragraph 2 of Article 4 of the Tax Law mean income derived by individuals from interests of the State treasury bonds issued by the Ministry of Finance of the People’s Republic of China; interests derived from financial bonds issued by the State mean income derived by individuals from interests of financial bonds issued upon approval of the State Council.

Article 13 The “subsidies and allowances granted in accordance with the unified stipulations of the state?as mentioned in Item 3 of Article 4 of the Individual Income Tax Law refers to special government allowances, allowances for academicians, allowances for senior academicians that are granted in accordance with the provisions of the State Council, and other subsidies and allowances that are exempt from individual income tax as prescribed by the State Council..

Article 14 Welfare funds mentioned in Paragraph 4 of Article 4 of the Tax Law mean welfare funds drawn out in accordance with the relevant State stipulations from enterprises, institutions, State organs and social organizations or the living subsidies paid to individuals from funds of trade unions; relief funds mean the subsidies paid to individuals for tiding over living difficulties by the civil affairs department of the people’s governments at various levels.

Article 15 "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 mentioned in Paragraph 8 of Article 4 of the Tax Law means their income exempt from tax in accordance with the Regulations of the People’s Republic of China on Diplomatic Privileges and Immunities and the Regulations of the People’s Republic of China on Consular Privileges and Immunities.

Article 16 The scope and period for reduction of and exemption from individual income tax mentioned in Article 5 of the Tax Law shall be formulated by the provincial, autonomous regional and municipal people’s governments.

Article 17 Costs and expenses mentioned in Paragraph 2 of Section 1 of Article 6 of the Tax Law mean various direct expenditures by taxpayers on production and business operations, the part of indirect expenses listed in costs, sales expense, management expense and financial expense; the losses mean various non-business extra expenses by taxpayers during the production and business operations process.

When taxable income of taxpayers engaged in production and business operations cannot be correctly computed due to lack of complete and accurate data provided by the taxpayers, the income shall be ratified and decided by the tax authorities.

Article 18 The ‘gross income of each tax year?as mentioned in Article 6 (1) (iii) of the Individual Income Tax Law refers to incomes from profits, wages and salaries as obtained by taxpayers according to the agreements on contracted or leased operation; and the ‘deduction of necessary expenses?refers to the monthly deduction of 3,500 yuan.

Article 19 The original value of the Property mentioned in Paragraph 5 of Section 1 of Article 6 of the Tax Law means:
(1) Securities: the purchasing price and the expenses paid at the time
of purchase in accordance with the stipulations;
(2) Buildings: construction fees or purchasing price and other relevant expenses;
(3) Land use rights: the fund paid for obtaining the land use rights, expenses for development of the land and other relevant expenses;
(4) Machinery and equipment, motor vehicles and ships: the purchasing price, fees for transportation and installation and other relevant expenses; and
(5) Other property: determined with reference to the methods above. When the original value of the property cannot be correctly computed due to lack of complete and accurate certificates provided by the taxpayers, the tax authorities shall ratify and decide the original value of the property.

Article 20 Reasonable expenses mentioned in Paragraph 5 of Section 1 of Article 6 of the Tax Law mean the relevant expenses paid at the time of selling in accordance with the stipulations.

Article 21 Income of a single payment mentioned in Paragraph 4 and 6 of Section 1 of Article 6 of the Tax Law means:
(1) Income derived from labor services: the remuneration of each payment is counted as a single payment when it is obtained; successive payments within a month under the same item of income may be aggregated and counted as a single payment;
(2) Remuneration derived from writing: remuneration obtained at each publication is counted as a single payment;
(3) Income derived from royalties: remuneration derived from providing and assigning the rights of one item each time is counted as a single payment;
(4) Income derived from leasing of property: remuneration received within a month is counted as a single payment;
(5) Income derived from interests, dividends and extra dividends: remuneration obtained at each payment of interests, dividends and extra dividends is counted as a single payment; and
(6) Chance income: such income obtained each time is counted as a single payment.

Article 22 Income from transfer of property is taxed in accordance with the balance of income from a transfer of property minus the original value of the property and the reasonable expenses.

Article 23 When two or more persons jointly obtain income from the same item, the tax is levied after each person separately deducts expenses on his share of the income, in accordance with the provisions of the Tax Law regarding deductible expenses.

Article 24 Donations by individuals to education and other public undertakings mentioned in Section 2 of article 6 of the Tax Law mean donations by individuals to education and other social and public undertakings and the areas suffering severe natural disasters or poverty-stricken areas through social organizations or State organs within the territory of China.

The donation that does not exceed 30% of the taxable income claimed by taxpayers may be deducted from the taxable income.

Article 25 The expenses paid for basic endowment insurance, basic medical care insurance, unemployment insurance and house accumulation fund by entities and individuals shall be deducted from the taxable incomes of taxpayers in accordance with the provisions of the state.

Article 26 Income of wages and salaries derived from outside the territory of China mentioned in Section 3 of Article 6 of the Tax Law means income of wages and salaries obtained from jobs or employment outside the territory of China.

Article 27 The ‘additional deductions?as mentioned in Article 6 (3) of the Individual Income Tax Law refers to the deduction of the expenses prescribed by Article 29 of this Regulation in addition to the monthly deduction of 3,500 yuan.

Article 28 The scope of deduction of additional expenses mentioned in Section 3 of Article 6 of the Tax Law includes:
(1) Foreign employees who work in foreign-funded enterprises or foreign firms within the territory of China;
(2) Foreign experts who work upon the invitation of Chinese side in enterprises, institutions, social organizations and State organs within the territory of China;
(3) Individuals who have residence in the territory of China and obtain wages and salaries from their post or employment outside China; and
(4) Other persons determined by the competent departments of public finance and taxation under the State Council.

Article 29 The standard for additional deductions as mentioned in Article 6 (3) of the Individual Income Tax Law is 1,300 yuan.

Article 30 Overseas Chinese and compatriots of Hong Kong, Macao and Taiwan shall be taxed with reference to article 26, 27 and 28 of the rules.

Article 31 Individuals who have residence within the territory of China or have not residence but have stayed in China for a full year shall separately compute and pay tax on their remunerations obtained within and outside the territory of China.

Article 32 The amount of individual income tax paid by taxpayers who derive income outside the territory of China mentioned in Article 7 of the Tax Law means the tax paid by taxpayers who derive income outside the territory of China and should pay and have already paid the tax in accordance with the law of the source country or region of their income.

Article 33 The amount of tax computed according to provisions of the Tax Law mentioned in Article 7 of the Tax Law means the amount of tax paid by taxpayers who derive income outside the territory of China in accordance with different taxable items in different countries and regions, with the standards for deduction of expenses and applicable tax rate stipulated by the tax law; the sum of different tax items in the same country or region is the amount of deduction of the country or region.

When the amount of tax paid by taxpayers in a country or region outside the territory of China is lower than the amount of deduction of the country and region computed in accordance with the preceding paragraph, the difference of tax shall be paid in China; when the amount of tax exceeds the amount of deduction of the country or region, the surpassed part shall not be subtracted from the amount of tax in the same tax year but may be subtracted from the surplus of the deduction of the country or region in the following tax years but not for a term more than five years.

Article 34 When taxpayers apply in accordance with Article 7 of the Tax Law for deduction of the amount of individual income tax paid already outside China, they shall present the original tax payment receipt issued by the tax authorities abroad.

Article 35 Withholding agents, when making various kinds of payments that are subject to taxation, must withhold the taxes in accordance with the provisions of the Tax Law, turn them over to the State treasury on time and make itemized records for reference.

The payments mentioned in the preceding paragraph include payment in cash, payment by remittance, payment by the transfer of accounts and the computed monetary value of payments made in securities, in kind or in other forms.

Article 36 A taxpayer shall file tax returns to the competent taxation authority as required if he is under any of the following circumstances:
(1)His annual incomes exceed RMB 120 thousand Yuan;
(2)He obtains wages and salaries from two or more places within the territory of China;
(3)He obtains incomes from abroad;
(4)He obtains taxable incomes and there is no withholding agent; or
(5)Other circumstances as prescribed by the State Council.
A taxpayer with an annual income of RMB 120 thousand Yuan shall conduct tax declaration at the competent taxation authority within three months after the end of a year.
The measures for the administration of tax declaration places for taxpayers and other relevant matters shall be formulated by the State Administration of Taxation.

Article 37 The "withholding declaration for all taxpayers and in full amount" as mentioned in Article 8 of the Individual Income Tax Law refers that a withholding agent shall, within one month after the taxes are withheld, report the basic information on the individuals with taxable incomes, the amount of taxable incomes, specific amount of the withheld taxes, the total amount thereof and other relevant tax information to the competent taxation authority.

The measures for the administration of withholding declaration for all the taxpayers and in full amount shall be formulated by the competent departments of Taxation under the State Council.

Article 38 When taxpayers personally filing returns file tax returns, their amount of tax withheld already within the territory of China shall be deducted from the tax payable in accordance with the provisions.

Article 39 Taxpayers who have two or more categories of income mentioned in Article 2 of the Tax Law shall compute and pay tax on the items separately. When taxpayers obtain income of Categories 1, 2 and 3 of Article 2 of the Tax Law from two or more places within the territory of China, tax shall be computed and levied on the amalgamated income of the same category.

Article 40 The given trades mentioned in Article 9 (2) of the Tax Law mean mining, ocean shipping and deep sea fishing industries and other industries determined by the competent departments of public finance and taxation under the State Council.

Article 41 The manner to compute and levy tax on annual basis and pay tax advance in monthly installments mentioned in Section 2 of Article 9 of the Tax Law means the tax payable from the wages and salaries of workers of the given trades mentioned in Article 38 of the rules, which shall be paid in advance in monthly installments and the wages and salaries of the whole year shall be totalled within 30 days from the end of the year and the real amount of tax shall be computed and levied on the 12-month average, with a refund for any overpayment or a supplemental payment for any deficiency.

Article 42 The fact that tax must be paid and turned over to the State treasury within 30 days after the end of a tax year as mentioned in Section 4 of Article 9 of the Tax Law means that taxpayers who derive income from contracting and leasing operations of enterprises or institutions with a single payment at the end of each year and must pay and turn over tax to the State treasury within 30 days after they obtain income.

Article 43 In accordance with Article 10 of the Tax Law, income in foreign currency shall be taxed on the equivalent amount coverted into Renminbi according to the middle price of exchange rate of RMB on the last day of the previous month before the tax payment receipt is issued. Following provisions of the Tax Law, the final settlement after the end of each year will not re-convert the advance payment on monthly installments or each time on the income in foreign currency; the part that needs to supplement payment of the deficiency shall be taxed on the equivalent amount converted into Renminbi according to the middle price of exchange rate of RMB on the last day of the previous tax year.

Article 44 When the tax authorities pay service fee to withholding agents in accordance with Article 11 of the Tax Law, they shall each month issue income refund notices to withholding agents, based on the actual amount of tax withheld. Withholding agents shall complete refunding procedures with refund notices at the designated banks.

Article 45 Standardized tax returns for individual income tax, returns, for withholding individual income tax and individual tax payment receipts are to be printed by the administrative department in charge of Taxation under the State Council.

Article 46 The tax year mentioned in the Tax Law and the rules means each year on the Gregorian calendar starting on January 1 and ending on December 31.

Article 47 Individual income tax shall be computed and levied in accordance with the Tax Law and the rules from 1994 tax years.

Article 48 These rules shall go into effect on the day of their promulgation. The Interim Provisions of the State Council of The People's Republic of China on Reduction of Individual Income Tax from Wages and Salaries of Foreigners Working in China issued by the State Council on August 8, 1987 shall be rescinded at the same time.