Laws of the People's Republic of China

Circular of the Ministry of Finance and the State Administration of Taxation concerning Adjusting the Expenditure Deduction Standards for Individual Income Taxes on Individual Business Owners as well as Individual Proprietorship Enterprise or Partnership Enterprise Investors

Cai Shui [2006] No. 44

The public finance departments (bureaus) and bureaus of local taxation of all provinces, autonomous regions, municipalities directly under the Central Government, cities specifically designed in the state plan, and the Bureau of Public Finance of Xinjiang Production and Construction Army Corps:

According to the provisions of the current Individual Income Tax Law, the Regulations for its implementation and other relevant policies, we hereby notice of the relevant issues concerning the expenditure deduction standards for individual income taxes on individual business owners as well as individual proprietorship enterprise or partnership enterprise investors as follows:

I.

When individual income taxes are calculated and collected on the production and management incomes of individual business owners as well as individual proprietorship enterprise and partnership enterprise investors according to law, the expenditure deduction rate for every individual business owner, individual proprietorship enterprise or partnership enterprise investor shall be determined at 19,200 Yuan/year (1,600 Yuan/month).

II.

Paragraph 1 of Article 13 of the "Circular of the State Administration of Taxation on Printing and Distributing the Measures for Calculation of Individual Income Taxes of Individual Businesses (for Trial Implementation)" (Guo Shui Fa [1997] No. 43) is amended as: "The expenditure deduction rate for an individual business owner shall be 19,200 Yuan/year (1,600 Yuan/month); the wage deduction rates for practitioners shall be determined by the bureau of local taxation of each province, autonomous region, or municipality directly under the Central Government in light of the local actual situation, and shall be reported to the State Administration of Taxation for archival filing."

III.

Item (1) of Article 6 of Attachment 1 of the "Circular of the Ministry of Finance and the State Administration of Taxation on Printing and Distributing the Provisions on the Collection of Individual Income Taxes from Individual Proprietorship Enterprise and Partnership Enterprise Investors" (Cai Shui [2000] No. 91) is amended as: "The expenditure deduction rate for every investor shall be 19,200 Yuan/year (1,600 Yuan/month). None of an investor's wages may be deducted before tax is collected."

The present Circular shall go into effect as of January 1, 2006.

The Ministry of Finance

The State Administration of Taxation

April 10, 2006