INDIVIDUALS who have domicile in China and individuals who reside in China for at least one year are generally subject to Individual Income Tax on income derived from sources both within and outside China that is attributable to the work done in China.

Other individuals are subject to tax on income derived from sources within China only.

Individual Income Tax is calculated on a monthly basis. A standard deduction of 4,000 yuan (US$483.6) is allowed to non-residents with respect to employment income. Other standard deductions apply to individual businessmen and income from personal services, author's remuneration, royalties and income from the leasing or assignment of property. Individuals may deduct income tax paid outside China from the amount of Individual Income Tax payable on income from sources outside China.

Individual Income Tax applies to employment income (at progressive rates from 5 per cent to 45 per cent); income of individual businessmen (at progressive rates from 5 per cent to 35 per cent); income from contracting for or leasing of the operation of enterprises or institutions (at progressive rates from 5 per cent to 35 per cent); and income from rendering personal services (at a flat rate of 20 per cent).

Royalties, interest and dividends, income from the leasing and assignment of property, contingency income and other income determined as taxable by the State Council are also generally subject to Individual Income Tax at a fixed rate of 20 per cent.

Items that are exempt from the Individual Income Tax include interest on savings deposits in Chinese banks, interest on government bonds, state allowances and subsidies, social welfare, pension and other benefits, insurance indemnifications, income of foreign diplomatic personnel where tax-exempt under other Chinese laws, and other income approved as tax-exempt by the State Council.

(Star News)