Laws of the People's Republic of China

Ministry of Finance, State Administration of Taxation

Reply of the Ministry of Finance and State Administration of Taxation on Relevant Issues of the Individual Income Tax

Cai Shui [2005] No. 94

To the department of public finance and the local taxation bureau of Jiangsu Province:

Your Request for Instructions on Relevant Issues of the Individual Income Tax (Su Di Shui Fa [2005] No. 50) has been received. Upon the deliberation, the reply shall be as follows:

1.

Issue concerning how to deal with the individual income tax and enterprise income tax after an entity withdraws the supplementary old-age insurance for individual. When the commercial supplementary old-age insurance is purchased by an enterprise for its employees, it shall be subject to the individual income tax item of the "income from wages and salaries" and pay the individual income tax pursuant to the tax law when handle the formalities of insurance; if it is withdrawn for any reason and the individuals fail to obtain the actual income, the individual income tax which has been paid shall be refunded.

2.

Issue concerning the individual income tax on an individual's income gained by providing guaranty. Where an individual obtains payment by providing an enterprise or another person with a guaranty, he shall pay individual income tax according to the item - "other income" as specified in the Individual Income Tax Law. The tax payable shall be levied through withholding by the entity or individual that makes the payment.

Ministry of Finance

State Administration of Taxation

June 2, 2005