Laws of the People's Republic of China

    The Fourth Meeting of the Standing Committee of the Eighth
National People's Congress, having considered the proposal
submitted by the State Council on the Draft Amendment to the
Individual Income Tax Law of the People's Republic of China,
decides to amend the Individual Income Tax Law of the People's
Republic of China as follows, with a view to intensifying the
reform of the tax system, simplifying the tax system and making the
tax burden equitable:

    1. Article 1 is amended as follows: "Individual income tax
shall be paid in accordance with the provisions of this Law by
individuals who, with or without domiciles in the People's Republic
of China, have resided in the country for one year or more on their
income gained within or outside China.

    "Individuals who have no domiciles and do not reside in the
People's Republic of China or who have no domiciles but have
resided in China for less than one year shall pay individual income
tax on their income gained within China in accordance with the
provisions of this Law."

    2. Article 2 is amended as follows: "Individual income tax
shall be paid on the following categories of individual income:

    (1) income from wages and salaries;

    (2) income from production or business operation conducted by
self-employed industrial and commercial households;

    (3) income from contracted or leased operation of enterprises
or institutions;

    (4) income from remuneration for personal services;

    (5) income from author's remuneration;

    (6) income from royalties;

    (7) income from interest, dividends and bonuses;

    (8) income from the lease of property;

    (9) income from the transfer of property;

    (10) incidental income; and

    (11) income from other sources specified as taxable by the
department of finance under the State Council."

    3. Article 3 is amended as follows: "Individual income tax
rates:

    (1) For income from wages and salaries in excess of specified
amounts, the progressive rates ranging from 5 percent to 45 percent
shall apply (see the appended  schedule of tax rates).

    (2) For income of self-employed industrial and commercial
households from production or business operation and income of enterprises or institutions from contracted or leased operation
that are in excess of specified amounts, the progressive rates
ranging from 5 percent to 35 percent shall apply (see the appended
schedule of tax rates).

    (3) For income from author's remuneration, a flat rate which
is 20 percent shall apply, and the amount of tax payable shall,
however, be reduced by 30 percent.

    (4) For income from remuneration for personal services, a flat
rate which is 20 percent shall apply. Where income gained at one
time from remuneration for personal services is extremely high, an
additive tax may be levied. Specific measures shall be stipulated
by the State Council.

    (5) For income from royalties, interest, dividends, bonuses,
lease of property, transfer of property, incidental income or
income from other sources, a flat rate which is 20 percent shall
apply."

    4. Article 4 is amended as follows: "The following categories
of individual income shall be exempted from individual income tax:

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

    (2) interest on savings deposits, national debts and other
financial debentures issued by the State;

    (3) subsidies and allowances given according to the unified
provisions of the State;

    (4) welfare benefits, pensions for the family of the deceased
and relief payments;

    (5) insurance indemnities;

    (6) military severance pay and demobilization pay for armymen;

    (7) settlement pay, severance pay, retirement pay, as well as
full-pay retirement pension for veteran cadres  and their living
allowances, received by carders, staff and workers according to the
unified provisions of the State;

    (8) income, exempted from tax according to the provisions of the relevant Laws of China, of diplomatic representatives and
consular officers and other personnel of foreign embassies and
consulates in China;

    (9) income exempted from tax as stipulated in the
international conventions to which the Chinese Government has
acceded or in agreements it has signed; and

    (10) income exempted from tax with the approval of the
department of finance under the State Council."

    5. An article is added as  Article 5: "In any of the
following circumstances, individual income tax may be reduced upon
approval:

    (1) income of the disabled, the aged without families  or
family members of martyrs;

    (2) suffering great losses from serious natural disasters; or

    (3) other cases in which tax reduction is approved by the
department of finance under the State Council."

    6. Article 5 is changed to be Article 6, and two paragraphs
are added as Paragraph 2 and Paragraph 3 respectively. This Article
is amended as follows: "The amount of taxable income shall be
computed as follows:

    (1) For income from wages and salaries, the amount of taxable
income shall be the part remaining after deduction of 800 yuan for
expenses from a monthly income;

    (2) For income from production or business operation gained by
self-employed industrial and commercial households, the amount of
taxable income shall be the part remaining after deduction of the
costs, expenses and losses  from the gross income in a tax year;

    (3) For income from contracted or leased operation of enterprises or institutions, the amount of taxable income shall be
the part remaining after deduction of the necessary expenses  from
the gross income in a tax year;

    (4) For income from remuneration for personal services,
author's remuneration, royalties and lease of property, the amount
of taxable income shall be the part remaining after deduction of 800 yuan for expenses from the amount received in a single payment
not exceeding 4,000 yuan; or after deduction of 20 percent from the
amount for a single payment of 4,000 yuan or more;

    (5) For income from the transfer of property, the amount of taxable income shall be the part remaining  after deduction of the
original value of the property and the reasonable expenses from the
income gained from such transfer; and

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

    The part of individual income donated to educational and other
public welfare undertakings shall be deducted from the amount of taxable income in accordance with the relevant regulations of the
State Council.

    For taxpayers who have no domiciles in China but obtain wages
or salaries within China, or who have domiciles in China but obtain
wages or salaries outside China, an additional deduction for
expenses may be determined on the basis of the average income
level, living standard and the changes in exchange rates. The
applicable scope and standard of the additional deduction for
expenses shall be stipulated by the State Council."

    7. An article is added as  Article 7: "For income gained by
taxpayers from outside China, the amount of individual income tax
paid outside China shall be permitted to be deducted from the
amount of tax payable. The amount to be deducted, however, shall
not exceed the amount of tax  payable as calculated according to
the provisions of this Law on income gained by the taxpayer from
outside China."

    8. Article 6 is changed to be Article 8 and amended as follows
: "For individual income tax, the income earner shall be the
taxpayer and the paying unit or individual shall be the withholding
agent. If a taxpayer receives wages or salaries from two or more
sources, and there is no withholding agent, the taxpayer shall file
returns and pay tax personally.

    9. Article 7 is changed to be  Article 9, and three paragraphs
are added as Paragraph 2, Paragraph 3 and Paragraph 4
respectively. This Article is amended as follows: "The tax
withheld each month by a withholding agent and the tax payable each
month by a taxpayer personally filing tax returns shall be turned
in to the State Treasury within the first seven days of the
following month and the tax returns submitted to the tax
authorities.

    The tax payable on income from wages and salaries shall be
turned in on a monthly basis by the withholding agents or by the
taxpayers to the State Treasury within the first seven days of the
following month and the tax returns submitted to the tax
authorities. The tax payable on income from wages and salaries for
specified trades may be computed on an annual basis and paid in
advance in monthly installments, and specific measures therefor
shall be stipulated by the State Council.

    The tax payable on income gained by self-employed industrial
and commercial households from production or business operation
shall be computed on an annual basis and paid in advance in monthly
installments. Such payment shall be made in advance by taxpayers
within the first seven days of the following month, and final
settlement shall be made within three months after the end of each
year. Any excess payment shall be refunded and any deficiency
repaid.

    The tax payable on income of enterprises and institutions
from contracted or leased operation shall be computed on an annual
basis and turned in by taxpayers to the State Treasury within 30
days after the end of each year and the tax returns submitted to
the tax authorities. Taxpayers who gain income from contracted or
leased operation in installments during a year shall pay tax in
advance within the first seven days after each installment, and
final settlement shall be made within three months after the end of each year; any excess payment shall be refunded and any deficiency
repaid.

    Taxpayers who earn income outside China shall pay tax to the
State Treasury within 30 days after the end of each year and submit
the tax returns to the tax authorities."

    10. Article 9 is deleted.

    11. Article 8 is changed to be Article 10 and amended as
follows: "All categories of income shall be computed in terms of Renminbi(RMB). Income in foreign currency shall be taxed on the
equivalent amount converted into Renminbi according to the foreign
exchange rate quoted by the State Exchange Control Authorities."

    12. Article 10 is changed to be Article 11 and amended as
follows: "A service fee of two percent of the amount of tax
withheld shall be paid to the withholding agent."

    13. Article 11 is deleted.

    14. Article 12 is deleted.

    15. Article 13 is deleted.

    16. An article is added as  Article 12: "The collection and
the administration of individual income tax shall be governed by
the provisions of the Law of the People's Republic of China on the
Administration of Tax Collection."

    17. Article 14 is changed to be Article 13 and amended as
follows: "The State Council shall formulate regulations for
implementation in accordance with this Law.

    In addition, the Schedule of Individual Income Tax Rates
(Applicable to income from wages and salaries) is amended as
Schedule 1 of Individual Income Tax Rates (Applicable to income
from wages and salaries) and Schedule 2 of Individual Income Tax
Rates (Applicalbe to income gained by self-employed industrial and
commercial households from production or business operation and
income gained by enterprises and institutions from contracted or
leased operation ).

    Schedule 1. Individual Income Tax Rates              

    (Applicable to income from wages and salaries)

    Grade Monthly Taxable Income Tax Rate(%)

    1  Income of 500 yuan or less                              5

    2  That part of income in excess of 500 to 2,000 yuan      10

    3  That part of income in excess of 2,000 to 5,000 yuan    15

    4  That part of income in excess of 5,000 to 20,000 yuan   20

    5  That part of income in excess of 20,000 to 40,000 yuan  25

    6  That part of income in excess of 40,000 to 60,000 yuan  30

    7  That part of income in excess of 60,000 to 80,000 yuan  35

    8  That part of income in excess of 80,000 to 100,000 yuan 40

    9  That part of income in excess of 100,000 yuan           45

    (Note: "Monthly taxable income" mentioned in this schedule refers
to amount remaining after deduction of 800 yuan for expenses or an
additional deduction for expenses from monthly income in accordance
with the provisions of Article 6 of this Law.)

    Schedule 2. Individual Income Tax Rates

    (Applicalbe to income gained by self-employed industrial and
commercial households  from production or business operation and
income gained by enterprises and institutions from contracted or
leased operation)

    Grade Annual Taxable Income Tax Rate(%)

    1  Income of 5,000 yuan or less                            5

    2  That part of income in excess of 5,000 to 10,000 yuan   10

    3  That part of income in excess of 10,000 to 30,000 yuan  20

    4  That part of income in excess of 30,000 to 50,000 yuan  30

    5  That part of income in excess of 50,000 yuan            35

    (Note: "Annual taxable income" mentioned in this schedule refers to
the amount remaining after deduction of the costs, expenses and
losses from the gross income in a tax year in accordance with the
provisions of Article 6 of this Law.)

    This Decision shall go into effect as of January 1, 1994. The
Interim Regulations of the People's Republic of China on Income Tax
of the Urban and Rural Self-employed Industrial and Commercial
Households promulgated by the State Council on January 7, 1986 and
the Interim Regulations of the People's Republic of China on
Individual Income Regulation Tax promulgated by the State Council
on September 25, 1986 shall be annulled therefrom. Where the
contents of other administrative rules and regulations regarding
individual income tax formulated before the implementation of this
Decision contravene the present Decision, the present Decision
shall prevail.