Laws of the People's Republic of China

Circular of the State Administration of Taxation Concerning the Clarification of the Standards for Self-declarations to Be Made by the Taxpayers with an Annual Income of 120,000 Yuan or More

Guo Shui Han [2006] No.1200

The local taxation bureaus of each province, autonomous region, municipality directly under the Central Government and city specifically designated in the state plan, and the state taxation bureaus of Xizang Autonomous Region and Ningxia Autonomous Region:

After the Circular of the State Administration of Taxation concerning Printing and Distributing the Measures for the Self-declaration of Individual Income Tax (for Trial Implementation) (Guo Shui Fa [2006] No. 162, hereinafter referred to as Measures) was issued, some regions have requested us to further definite the standards for calculating the annual income of 120,000 Yuan or more. We hereby inform the following related matters:

1.

As regards a taxpayer with an annual income of 120,000 Yuan or more, in addition to his/her annual income acquired according to the provisions of Articles 6through 8 in the Measures, the amount of his/her annual income shall also be simultaneously included according to the following provisions:

(1)

as regards the income from remuneration for labor and the income from franchise royalties, the related expenses of taxation paid by the taxpayer in the course of providing labor services or alienating franchise use right may not be deducted.

(2)

as regards the income from leasing property, the related expenses of taxation paid by the taxpayer in the course of leasing property may not be deducted; all the income from leasing property, which covers more than one year but is acquired once and for all, shall be considered as the income of the year when such income is actually acquired.

(3)

as regards the income from individual transfer of premise, if the individual income tax is levied upon verification, the annual income shall be computed by respectively changing the actual collecting rates (1%, 2%, 3%) into the taxable rates (5%, 10%, 15%).

(4)

as regards the income from interest of individual savings deposit and the income from enterprise bond interest, such incomes shall be considered as the income of the year when they are actually acquired by the taxpayer.

(5)

as regards an industrial and commercial household or the investor of a sole proprietorship, in case the individual income tax is verified on the basis of a levying rate, the taxable amount shall be computed by changing the levying rate into the corresponding rate of taxable income.

With respect to the investors of a partnership enterprise, after the taxable amount is decided according to the methods mentioned above, the copartners shall decide their respective taxable amount on the basis of the proportion of distribution as stipulated in the partnership agreement; if the proportion is not stipulated in the partnership agreement, their respective taxable amount shall be decided by distributing the total amount equally to all copartners. If a copartner invests in two or more enterprises, his/her annual income shall be the total amount of all the taxable amounts of income from all the enterprises he/she invests in.

(6)

as regards the income from the assignment of stocks, the amount of income to be declared in a tax year shall be the positive number acquired by offsetting the loss with the income from the assignment of personal stocks; if the result is negative, "Zero" shall be filled in this item.

2.

The standards for computing annual incomes mentioned above are proposed mainly to facilitate the taxpayers in their performance of their obligation of self-declaration, they may only be applicable to the self-declarations to be made by the taxpayers with individual annual income of 120,000 Yuan or more, and shall not apply to the calculation of individual tax payment. The tax authorities of each level shall extensively disseminate and interpret the calculating standards for self-declaration to be made by the taxpayers with an annual income of 120,000 Yuan or more to the general public.

3.

In accordance with provisions of Article 24 in the Measures, which stipulates that: "A taxpayer may authorize an intermediary institution which is qualified to be the tax agency or someone else to make tax declaration." When voluntarily entrusting an intermediary institution with the tax agency qualification (hereinafter referred to as intermediary institution), withholding agent or any other individual to handle self-declaration on his/her behalf, a taxpayer with the annual income of 120,000 Yuan or more shall conclude an agreement (contract) on entrusting the self-declaration of individual income tax. Meanwhile, the taxpayer shall inform the agent all the taxable items, amount of income and amount of the tax to be paid within the tax year, and the agent shall declare after amalgamating all the incomes acquired by the taxpayer and attach the agreement (contract) on entrustment.

When accepting the self-declaration made by an intermediary institution, withholding agent or any other individual on behalf of a taxpayer, the tax authority shall examine and verify the agreement (contract) on entrusting declaration concluded between the taxpayer and the assignee, and if such agreement (contract) is not presented, the self-declaration may not be accepted.

The State Administration of Taxation

December 15, 2006