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China: Individual Income Tax in China

The PRC tax law continues to be an area of dynamic legislative activity. After having substantially revised the PRC Corporate Income Tax framework in 2011 and in more recent years having abolished the PRC Business Tax and pushed forward the VAT reform, the PRC Standing Committee of the National People‘s Congress had implemented a new PRC Individual Income Tax Law (“IIT Law”) in late September 2018.

Certain of its stipulations became effective since 1 October 2018 (see Chapter I below), while the full IIT Law took full effect as of 1 January 2019 (see Chapter II below).

In addition, in late December 2018 the Implementing Regulations in the IIT Law (“Implementing Regulations”) and the Interim Measures for Special Additional Deductions for IIT (“Deduction Measures”) were promulgated and both became effective as of 1 January 2019, together with certain other related announcements issued by the State Tax Administration.

The major changes refer to a new categorization of income groups, a new annual accrual asis, new taxation tables, new personal deductions, new specific expense deductions, new rules on the duration of tax residency purposes and new anti-avoidance rules.

Hence, employers and employees need to review and adapt their labour arrangements or internal payroll and accounting processes in light of the new IIT legislation and are well advised to constantly monitor the current status of the IIT Law‘s implementation and to update payroll and accounting processes to ensure legal compliance.


China-Individual Income Tax.pdf