Individual Income Tax Law of the People's Republic of China

(Adopted at the Third Session of the Fifth National People's Congress on September 10, 1980; amended for the first time in accordance with the Decision on Revising the Individual Income Tax Law of the People's Republic of China adopted at the 4th Meeting of the Standing Committee of the Eighth National People's Congress on October 31, 1993; amended for the second time in accordance with the Decision on Revising the Individual Income Tax Law of the People's Republic of China adopted at the 11th Meeting of the Standing Committee of the Ninth National People's Congress on August 30, 1999; amended for the third time in accordance with the Decision on Revising the Individual Income Tax Law of the People's Republic of China adopted at the 18th Meeting of the Standing Committee of the Tenth National People's Congress on October 27, 2005; amended for the fourth time in accordance with the Decision on Revising the Individual Income Tax Law of the People's Republic of China adopted at the 28th Meeting of the Standing Committee of the Tenth National People's Congress on June 29, 2007; amended for the fifth time in accordance with the Decision on Revising the Individual Income Tax Law of the People's Republic of China adopted at the 31st Meeting of the Standing Committee of the Tenth National People's Congress on December 29, 2007; amended for the sixth time in accordance with the Decision on Revising the Individual Income Tax Law of the People's Republic of China adopted at the 21st Meeting of the Standing Committee of the Eleventh National People's Congress on June 30, 2011; and amended for the seventh time in accordance with the Decision on Revising the Individual Income Tax Law of the People's Republic of China adopted at the 5th Meeting of the Standing Committee of the Thirteenth National People's Congress on August 31, 2018)

Article 1   An individual who is domiciled in China, or an individual who is not domiciled in China but has resided in China for an aggregate of 183 days or more within a tax year, shall be regarded as a resident individual. Income received by a resident individual from within China or overseas shall be subject to individual income tax pursuant to the provisions of this Law. 

An individual who is not domiciled in China and does not reside in China, or an individual who is not domiciled in China but has resided in China for less than an accumulated 183 days within a tax year, shall be regarded as a non-resident individual. Income received by a non-resident individual from within China shall be subject to individual income tax pursuant to the provisions of this Law. 

A tax year shall start from January 1 and end on December 31 within a calendar year. 

Article 2   The following categories of individual income shall be subject to individual income tax: 

(1) Income from salary and wages; 

(2) Income from remuneration for personal services; 

(3) Income from author's remuneration; 

(4) Income from royalties; 

(5) Income from business operation; 

(6) Income from interest, dividends or bonuses; 

(7) Income from leasing of assets; 

(8) Income from transfer of assets; and 

(9) Incidental income.  

For forms of income (1) through (4) in the preceding paragraph (hereinafter collectively referred to as "Comprehensive Income") earned by a resident individual, they shall be aggregated on a tax year basis to calculate the individual income tax payable while the same earned by a non-resident individual shall be calculated separately on a monthly or transaction basis. For forms of income (5) through (9) in the preceding paragraph, the individual income tax payable shall be calculated separately pursuant to the provisions of this Law. 

Article 3   Individual income tax rates: 

(1) For comprehensive income in excess of the specified amounts, progressive tax rates ranging from 3 percent to 45 percent shall apply (see schedule of tax rates attached); 

(2) For income from business operation in excess of the specified amounts, progressive tax rates ranging from 5 percent to 35 percent shall apply (see schedule of tax rates attached); and 

(3) For income from interest, dividends or bonuses, income from leasing of assets, income from transfer of assets, and incidental income, a flat tax rate of 20 percent shall apply. 

Article 4   The following categories of individual income shall be exempted from individual income tax: 

(1) Prize money for achievements in such fields as science, education, technology, culture, public health, sports and environmental protection, granted by at least people's governments at the provincial level, ministries and commissions under the State Council, or corps of the Chinese People's Liberation Army, or by foreign or international organizations; 

(2) Interest on the national debt or on financial bonds issued by the State; 

(3) Subsidies and allowances paid according to the uniform provisions issued by the State; 

(4) Welfare benefits, benefits for the family of the deceased or disabled, and relief payments; 

(5) Insurance compensation; 

(6) Military severance pay, demobilization pay and gratuities for army personnel; 

(7) Settlement pay, severance pay, basic pension or retirement pay, payments and living allowances for retired veteran cadres, that are paid to cadres and employees according to the uniform provisions issued by the State; 

(8) Income of diplomatic representatives, consular officers and other personnel of foreign embassies and consulates to China, which, pursuant to provisions of relevant laws, shall be exempted from tax; 

(9) Tax-exempt income stipulated under the international conventions to which the Chinese government is a member, or agreements which the Chinese government has signed; and 

(10) Other tax-exempt income as stipulated by the State Council. 

Any tax exemption provisions aforementioned in item (10) of the preceding paragraph shall be submitted by the State Council to the Standing Committee of the National People's Congress for the record. 

Article 5   Individual income tax may be deduced in any of the following circumstances. The specific range and period of validity of the tax reduction shall be determined by the people's government of a province, autonomous region or municipality directly under the Central Government and be submitted to the Standing Committee of the People's Congress at the same level for the record: 

(1) Income received by disabled persons, elderly persons with no family, or the close family of martyrs; or 

(2) Individuals suffering heavy losses as a result of natural disasters; 

The State Council may stipulate other circumstances for tax deduction, and the stipulation shall be submitted to the Standing Committee of the National People's Congress for the record.  

Article 6   The amount of taxable income shall be calculated as follows: 

(1) For comprehensive income received by a resident individual, the amount of taxable income shall be the balance after deduction of RMB 60,000 yuan, special deductions, itemized deductions for specific expenditures, and other deductible items determined pursuant to law, from the modified income in a tax year. 

(2) For income received from salary and wages by a non-resident individual, the amount of taxable income shall be the balance after deduction of RMB 5,000 yuan from his or her monthly income. For income from remuneration for personal services, author's remuneration or royalties, the taxable income shall be the amount received in a single payment. 

(3) For income from business operation, the amount of taxable income shall be the balance after deduction of costs, expenses and losses from the gross income in a tax year. 

(4) For income from leasing of assets, the amount of taxable income shall be the balance after deduction of RMB 800 yuan from the amount received in a single payment not exceeding RMB 4,000 yuan; or after deduction of 20 percent from the amount for a single payment of RMB 4,000 yuan or more. 

(5) For income from transfer of assets, the amount of taxable income shall be the balance after deduction of the original value of the asset and reasonable expenses, from the income gained from such transfer. 

(6) For interest, dividends, bonuses, and incidental income, the amount of taxable income shall be the full amount received in each payment. 

The modified income from remuneration for  personal services, author's remuneration and royalties shall be the balance after deduction of 20 percent from the income received. Income from author's remuneration shall be further reduced and taken as 70 percent of the amount calculated from above. 

Amounts donated out of individual income to education, poverty alleviation or other public welfare undertakings, may be deducted from the taxable income, so long as the donation does not exceed 30 percent of the declared taxable income. Where the State Council stipulates that the full amount of a donation made to public welfare undertakings is deducted from the taxable income, such provisions shall prevail. 

Special deductions stipulated in Subparagraph (1) of the first paragraph of this Article shall include basic old-age insurance, basic medical insurance, unemployment insurance and other social insurance contributions, as well as housing provident fund contributions made by resident individuals in accordance with the scope and standards provided by the State; itemized deductions for specific expenditures shall include expenditure on children's education, his own continuing education, medical treatment  for serious illness, housing loan interest or housing rent, and supporting the elderly, whose details in scope, standards and implementation steps shall be determined by the State Council, and then be submitted to the Standing Committee of National People's Congress for the record. 

Article 7   Where a resident individual obtains income from outside of China, individual income tax paid overseas can be credited against their tax payable in China; however, the tax credit may not exceed the individual income tax that would be payable on the foreign income if calculated in accordance with this Law. 

Article 8   In any of the following circumstances, the tax authorities have the power to make a tax adjustment by using reasonable methods: 

(1) Where a transaction between an individual and his or her related party that is not in accordance with the arm's length principle has been completed, without good cause, and led to decreased tax payable for the individual or his/her related party; 

(2) Where a resident individual, who by himself or jointly with a resident enterprise controls an enterprise that was established in a country (region) where the effective tax burden is distinctly low, does not distribute the profits attributable to the resident individual or reduces the distribution of those profits, without a reasonable cause of operation or management; or 

(3) Where an individual enters into an arrangement without a reasonable commercial purpose, leading to inappropriate tax benefits. 

Where additional tax payment is required after tax adjustment made by a tax authority under the preceding paragraph, the payment shall be made, with late payment surcharge levied according to law. 

Article 9   The taxpayer, for individual income tax purposes, shall be the person who receives the income. Organizations or individuals that make a payment of income shall be the withholding agents. 

Where a taxpayer has the Chinese Citizens' Identity Number, his Identity Number shall be the taxpayer identification number; where a taxpayer has no Chinese Citizens' Identity Number, the tax authority shall issue a taxpayer identification number to the taxpayer. A taxpayer must provide his taxpayer identification number to the withholding agent when the latter withholds and pays the tax. 

Article 10   In any of the following circumstances, a taxpayer shall file a tax return in accordance with the law: 

(1) Where the taxpayer obtains comprehensive income for which the annual tax reconciliation return is required; 

(2) Where the taxpayer obtains taxable income but there is no withholding agent; 

(3) Where the taxpayer obtains taxable income but the withholding agents has failed to withhold and pay the tax; 

(4) Where the taxpayer obtains income from overseas; 

(5) Where the taxpayer emigrates to another country and cancels his Chinese household registration; 

(6) Where a non-resident individual obtains salary and wages from two or more sources within China; or 

(7) Any other circumstances stipulated by the State Council. 

The withholding agent shall, in accordance with the national rules, withhold and pay tax in full for all its taxpayers, and furnish each individual taxpayer with information on his individual income and the tax withheld and paid, etc.