Laws of the People's Republic of China

the State Administration of Taxation

Circular of the State Administration of Taxation on Printing and Distributing the Interim Measures for the Administration of Withholding and Declaration of Individual Income Tax for All Taxpayers and in Full Amount

Guo Shui Fa [2005] No. 205

The state taxation bureaus and local taxation bureaus of all provinces, autonomous regions, municipalities directly under the Central Government and cities as specifically designated in the state plan:

With a view to strengthening the collection and administration of individual income tax, regulating the withholding acts of withholding agents and maintaining the legitimate rights and interests of taxpayers and withholding agents, and in accordance with the Individual Income Tax Law of the People's Republic of China and the Regulations on the Implementation thereof, the Law of the People's Republic of China on the Administration of Tax Collection and the Detailed Rules for the Implementation thereof and other tax-related provisions, the Interim Measures for the Administration of Withholding and Declaration of Individual Income Tax for All Taxpayers and in Full Amount are formulated The present Measures are hereby printed and distributed to you, please implement them earnestly. The Circular on the relevant issues concerning the implementation thereof is given as follows:

I.

Being fully aware of the significance of implementing the policy of withholding and declaration of individual income tax for all taxpayers and in full amount

The withholding and declaration for all taxpayers and in full amount is a breakthrough for enhancing the administration of individual income tax in the new situation, as well as the tendency for the construction of tax system and the reform of collection of individual income tax. The tax authorities at all levels should further change their mind, seek unity in thinking and fully recognize the significance of withholding and declaration for all taxpayers and in full amount for the purposes of constructing a harmonious society, carrying out scientific concept of development, improving tax payment services, and building up the public consciousness of tax payment.

II.

Improving the supporting measures and promoting the withholding and declaration for all taxpayers and in full amount in an active, steady and progressive manner

The withholding and declaration for all taxpayers and in full amount involves a lot of data and information about withholding agents and taxpayers and also means a heavy workload. So the tax authorities in all regions should actively create conditions, improve and perfect the system, thoroughly utilize all kinds of computerized means for their management, and in light of the principle of giving more priority to the key industries and enterprises than to the common ones as well as the principle of incorporation into management prior to regulation, take effective measures according to the actual situation, so as to promote the management work relating to withholding and declaration for all taxpayers and in full amount in a planned, progressive, active and steady way.

III.

Intensifying the propaganda, tutorship and training of tax-related laws and laying a foundation for the management work relating to the withholding and declaration for all taxpayers and in full amount

All regions should, in various forms and by various means, strengthen propaganda, do a good job in tutorship and training, and further enhance the professional abilities and levels of the withholding agents, the tax personnel and tax officials. Special efforts should be made according to the withholding agents' specific conditions to do a good job in the target-oriented propaganda and tutorship of emphasis, and special prominence should be given to the publicity of legal liabilities that shall be borne by the withholding agents due to their default of obligations, and to the tutorship about the specific withholding work of the tax personnel. For those withholding agents that do not carry out the detailed declaration for all taxpayers and in full amount, the taxation authorities at all levels shall intensify propaganda and urge them to carry out withholding and declaration for all taxpayers and in full amount as soon as possible.

During the course of implementation of these Measures, all regions shall timely find out the existing problems, take effective solutions, and timely report them to the State Administration of Taxation.

State Administration of Taxation

December 23, 2005

Interim Measures for the Administration of Withholding and Declaration of Individual Income Law for All Taxpayers and in Full Amount

Article 1

With a view to strengthening the collection and administration of individual income tax, regulating the withholding acts of the withholding agents, and maintaining the legitimate rights and interests of taxpayers and withholding agents, and in accordance with the Individual Income Tax Law of the People's Republic of China and the Regulations on the Implementation thereof, the Law of the People's Republic of China on the Administration of Tax Collection and the Detailed Rules for the Implementation thereof and other laws and regulations, the present Measures are formulated.

Article 2

A withholding agent shall fulfill the obligation of withholding and declaration of individual income law for all taxpayers and in full amount.

Article 3

The expression "withholding and declaration of individual income tax for all taxpayers and in full amount" (hereinafter referred to as "withholding and declaration") as mentioned in the present Measures shall mean that a withholding agent shall, within the next month after the taxes are withheld, report to the competent tax authority the basic information on the individuals to whom it pays taxable incomes (hereinafter referred to as "individuals"), items and amounts of taxable incomes, amount of the withheld taxes and other tax-related information when it pays taxable incomes to individuals, whether the individuals are its staff members, or whether the taxable incomes to be paid have amounted to the tax payment standards.

The term "withholding agents" as mentioned in the present Measures shall refer to the entities and individuals that pay taxable incomes to individuals.

Article 4

The taxable incomes subject to withholding and declaration shall include:

(1)

Income from wages and salaries;

(2)

Income from remuneration for labor services;

(3)

Income from contribution fees;

(4)

Income from royalties;

(5)

Income from interests, dividends and bonuses;

(6)

Income from lease of property;

(7)

Income from transfer of property;

(8)

Occasional incomes; and

(9)

Other income as prescribed by the financial department of the State Council.

Article 5

A withholding agent shall report to the competent tax authority the following basic information about individuals, such as name, type and number of identity card, position, place of domicile, effective phone number, effective address and postal code.

A withholding agent shall additionally report the relevant information about the following individuals:

(1)

Non-employees (excluding shareholders and investors): name of work place, etc.;

(2)

Shareholders and investors: total amount of corporate shares (investment), and amount of individual shares (investment), etc.; and

(3)

Individuals without domiciles in China (including employees and non-employees): foreign name, nationality or region, place of birth (both in Chinese and foreign language), approval number of residence (or number of the certificate of Taiwanese compatriots or the Home Visit Permit), number of employment certificate, occupation, domestic position, overseas position, time of entry, period of employment, estimated time for staying in China, estimated departure time , name, number of taxation registration, address, postal code and phone number of domestic employer, name (both in Chinese and foreign language) and address (both in Chinese and foreign language) of the overseas dispatching entity, and place of payment (including domestic and overseas payment), etc.

Where a thrift institution pays the income from interest on saving deposits to depositors, a securities redemption institution pays the income from interest on enterprise bonds to holders thereof, or a listed company pays the income from dividends and bonuses to shareholders, the following information may be reported for the time being: name, type and number of identity card, income from the paid interest (dividends or bonuses), and withheld taxes , etc.

All regions shall, on the basis of these basic information and the requirements of management work, create the Registration Form of Basic Individual Information, and require the withholding agents to fill out it.

Article 6

A withholding agent shall, when carrying out withholding and declaration for the first time, submit the basic individual information as prescribed in Article 5 . Where any individual or his basic information is changed, the withholding agent shall report the altered information to the competent tax authority within the next month after the taxes are withheld.

Article 7

A withholding agent shall, when withholding taxes, fill out a Report Form of Withheld Individual Income Tax (see Annex I) and a Detailed Payment Form of Individual Incomes (see Annex II) for each person item by item.

The Report Form of Withheld Individual Income Tax is used to fill out the information about the individual who has actually paid individual income tax. The Detailed Payment Form of Individual Incomes is used to fill out the information about the individual whose taxable income has been paid but such income has not amounted to the tax payment standards.

Where the computerized management of withholding and declaration has been carried out, the Detailed Payment Form of Individual Incomes may be incorporated into the Report Form for Withheld Individual Income Tax.

Article 8

When turning over the withheld taxes within the time limit as prescribed in the tax law, a withholding agent shall submit to the competent tax authority the Report Form of Withheld Individual Income Tax, Detailed Payment Form of Individual Incomes and basic individual information. If it is difficult to submit all of them at one time, they shall be submitted before the end of the next month after the taxes are withheld.

Article 9

A withholding agent shall set up a reference book on the withholding and declaration of individual income tax to correctly reflect the situation of the withheld individual income tax.

Article 10

The competent tax authority shall examine and verify vigorously the materials about withholding and declaration submitted by a withholding agent, and shall require the withholding agent to re-fill out the Report Form of Withheld Individual Income Tax or the Detailed Payment Form of Individual Incomes if he fails to fill them out person by person and item by item, or fails to fill them out correctly.

Article 11

A withholding agent may conduct withholding and declaration directly with the tax authority, or may conduct withholding and declaration according to the provisions by mail, data message or any other means.

Article 12

Where a withholding agent cannot submit the Report Form of Withheld Individual Income Tax, the Detailed Payment Form of Individual Incomes or basic individual information on time and requests for delay in declaration, the relevant provisions on tax collection shall be followed.

Article 13

When a withholding agent withholds taxes and the taxpayer requires the withholding agent to issue a voucher on withheld taxes, the withholding agent shall do issue such a voucher. A withholding agent shall submit the bottom copy of the voucher on withholding taxes to the competent tax authority when it/he conducts withholding and declaration in the next month after the voucher on withholding taxes is issued.

Article 14

The competent tax authority shall, according to the requirements of "uniform account" administration, establish an archive for each withholding agent, which shall include the following contents:

(1)

the withholding agent's code, name, type of registration certificate, number of tax registration certificate, phone number, e-mail address, industry, economic mode, address, postal code, legal representative (principal), chief accountant's name and phone number, tax registration organ, date of tax registration and competent tax authority; and

(2)

The numbers of employees and taxpayers, aggregate amount of taxable incomes (which shall be classified and aggregated by the category of income), tax-free incomes, payable taxes (which shall be classified and aggregated by the category of income), taxes to be reduced and exempted, deducted taxes, taxes to be made up (refunded), surcharges for overdue payment and fines, etc. of the whole year.

Article 15

The competent tax authority shall take the identity card number and the code of tax payment of an individual as the indicator to gather up the basic information and incomes of the individual and the information on tax payment and gradually set up the archives of individual incomes and tax payment.

Article 16

The tax authority shall, within three months after the end of a year, issue a Tax Payment Proof for Individual Income Tax of the People's Republic of China in the amount of individual income tax that has been actually paid in the whole year to the individual for whom the withholding and declaration are implemented.

Article 17

The tax authority shall, according to the tax-related information it has gathered, regularly conduct cross-auditing, analysis and appraisal of the information about the withholding and declaration conducted by withholding agents and tax returns files by individuals themselves.

Article 18

Where a withholding agent fails to set up or preserve the account books on withheld taxes or preserve the vouchers on withheld taxes or the relevant materials as required, it shall be punished in accordance with Article 61 of the Law on the Administration of Tax Collection.

Article 19

Where a withholding agent fails to submit to the competent tax authority, the Report Form of Withheld Individual Income Tax, the Detailed Payment Form of Individual Incomes or the basic individual information as required, it shall be punished in accordance with Article 62 of the Law on the Administration of Tax Collection.

Article 20

The tax authority shall keep secret of the information on the withholding agents and individuals. If it fails to do so, the principal and any other person held directly responsible for that shall be subject to administrative punishment by the tax authority or the relevant department.

Article 21

Any other tax-related violation shall be dealt with in accordance with the relevant provisions of laws and regulations.

Article 22

The competent tax authority shall intensify the publicity of tax law, tutorship of policies and consultation services to withholding agents and individuals.

Article 23

The state taxation bureaus and local taxation bureaus of all provinces, autonomous regions, municipalities directly under the Central Government and cities as specifically designated in the state plan may, according to the present Measures and in light of their local situation, formulate specific implementation measures and report them to the State Administration of Taxation for record.

Article 24

The power to interpret the present Measures shall remain with the State Administration of Taxation.

Article 25

The present Measures shall go into effect as of January 1, 2006. Where any of those provisions promulgated prior to the said date conflicts with or is inconsistent with the present Measures, the present Measures shall prevail.