Implementing Regulations of the Individual Income Tax Law of the People's Republic of China (Revised in 2008)

Implementing Regulations of the Individual Income Tax Law of the People's Republic of China (Revised in 2008)

Order of the State Council [2008] No.519

February 18, 2008

(Promulgated on January 28, 1994 in accordance with the Order No. 142 of the State Council of the People's Republic of China; revised for the first time in accordance with the Decision of the State Council on the Revision of the Implementing Regulations of the Individual Income Tax Law of the People's Republic of China made on December 19, 2005; and revised for the second time in accordance with the Decision of the State Council on the Revision of the Implementing Regulations of the Individual Income Tax Law of the People's Republic of China made on February 18, 2008)

Article 1 These Regulations are formulated in accordance with the Individual Income Tax Law of the People's Republic of China (the "Tax Law").

Article 2 For the purposes of Paragraph 1 of Article 1 of the Tax Law, the term "individuals domiciled in the People's Republic of China" shall mean individuals who, by reason of their permanent residence, family or economic interests, habitually reside in the People's Republic of China.

Article 3 For the purposes of the first paragraph of Article 1 of the Tax Law, the term "have resided in the People's Republic of China for no less than one year" shall mean to have resided within the People's Republic of China for 365 days of a tax year. No deduction from that number of days shall be made for temporary trips out of the People's Republic of China.
For the purposes of the preceding paragraph, the term "temporary trips out of the People's Republic of China" shall mean absence from the People's Republic of China for no more than 30 days in a single trip, or no more than a cumulative total of 90 days over two or more trips, within the same tax year.

Article 4 For the purposes of the first and second paragraphs of Article 1 of the Tax Law, the term "income derived from sources inside the People's Republic of China" shall mean income sourced from inside the People's Republic of China, and the term "income derived from sources outside the People's Republic of China" shall mean income sourced from outside the People's Republic of China.

Article 5 Whether or not the place of payment is inside the People's Republic of China, the following types of income shall be deemed to be income derived from sources inside the People's Republic of China:
1. Income for personal services provided inside the People's Republic of China through the holding of any office, employment, the performance of a contract, etc.;
2. Income derived from the leasing of property to a lessee for use inside the People's Republic of China;
3. Income derived from the assignment of property such as any building or other structure, land use rights, etc. inside the People's Republic of China or from the assignment inside the People's Republic of China of any other property;
4. Income derived from the licensing for use inside the People's Republic of China of any kind of licensing rights; and
5. Interest, dividend and special dividend income derived from any company, enterprise or other economic organization or individual inside the People's Republic of China.

Article 6 For income derived from sources outside the People's Republic of China by any individual not domiciled in the People's Republic of China, but who has resided in the People's Republic of China for between one and five years, subject to the approval of the competent tax authority, individual income tax may be paid only on that part of his income that is derived from companies, enterprises and other economic organizations or individuals inside the People's Republic of China. Any individual who has resided in the People's Republic of China for more than five years shall, commencing from the sixth year, pay individual income tax on all the income derived from sources outside the People's Republic of China.

Article 7 For any individual who is not domiciled in the People's Republic of China, but who has resided in the People's Republic of China for a consecutive or aggregate period of no more than 90 days in a tax year, that part of his income that is derived from sources inside the People's Republic of China but is paid by an employer outside the People's Republic of China, and which is not borne by any organization or office of the relevant employer located within the People's Republic of China, shall be exempt from individual income tax.

Article 8 The scope of the income categories described in Article 2 of the Tax Law shall be as follows:
1. The term "wage and salary income" shall mean wages, salaries, bonuses, year-end bonuses, profit shares, subsidies, allowances earned by individuals by virtue of the holding of any office or employment and other income earned by individuals relating to the holding of any office or employment.
2. The term "income derived by individual businesses from production and operating activities" shall mean:
(1) Income derived by individual businesses from engaging in industrial activities, the handicraft industry, the construction industry, the transport industry, commercial activities, the food and beverage industry, the service industry, the repair industry and production and operating activities in other industries;
(2) Income derived by individuals from engaging in the provision of educational, medical, advisory and other service activities for consideration, with approval from the relevant government authorities and after having obtained the required licenses;
(3) Other income derived by individuals from engaging in individual industrial and commercial production and operating activities; and
(4) All taxable incomes relating to the production and operating activities of the above individual businesses and individuals.
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