China Has Amended the Individual Income Tax Law

September 10, 2018
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On 31st August 2018, the 13th National People’s Congress passed the Amendments to the PRC Individual Income Tax Law (IIT Law).

The amendments destined to ease the tax burden on low and middle income wage earner, by raising the IIT threshold and adding further deductible expenses. Thus, from 1st October 2018, the minimum threshold for personal income tax will be increased from RMB 3,500 per month to RMB 5,000 per month.

The amended additional deductible expenses include:

—   Children Education expenses;

—   Expenses for further self-education;

—   Healthcare costs for serious illness;

—   Housing loan interest and housing rental;

—   Elderly care expenses and;

—   Charity donations of less than 30% of total earnings.

The amendments were directed by the government to care for the rapidly aging population in China and to encourage families to have more children, all while improving the fairness of the taxation system. The fairness element is expressed by the incorporation of tax anti-avoidance provisions.

Another purpose of the new IIT law is to modify the conditions under which a resident is paying taxes; the previous law stated that a person could only be taxed on their income in China, not worldwide, if they lived in China for a full year and only after 5 years of residence could all of their income be taxed. The new regulation states that a ‘tax paying resident’ is an individual who has stayed within China for an aggregate of 183 days in a single tax year. This new amendment is silent on the 5 year rule and will greatly impact foreigners who do business in China.

The scope, standards and procedures of those amendments will be regulated by the State Council and filed with the NPC Standing Committee.

PTL GROUP assists international companies in tax planning and tax management in China. We’ll be happy to assist you as well. Contact us.

PTL GROUP team