China's top legislature reviews draft amendment to Individual Income Tax Law

Xinhua
The Standing Committee of China's National People's Congress has begun reviewing a draft amendment to the Individual Income Tax Law at its bimonthly session that opened on Tuesday.
Xinhua

The Standing Committee of China's National People's Congress has begun reviewing a draft amendment to the Individual Income Tax Law at its bimonthly session that opened on Tuesday.

The draft amendment raises the minimum threshold for personal income tax from 3,500 yuan (about US$544) per month to 5,000 yuan, or 60,000 yuan per year.

This standard will also be applicable to those who have no domestic residence but receive an income from wages in China, as well as those who live in China but receive an income from overseas wages.

The draft amendment adds special expense deductions for items like children's education, continuing education, treatment for serious diseases, as well as housing loan interest and rent.

Entrusted by the State Council, Finance Minister Liu Kun told lawmakers at Tuesday's opening of the session that the revisions are aimed at implementing decisions by central authorities and ensuring a smooth individual income tax reform in accordance with the law.

The revisions focus on content that is no longer suitable for China's continuing reform, Liu said, adding that the changes have taken people's rising consumption expenses into account.

The changes are conducive to reducing tax burdens for taxpayers, raising people's income and boosting consumption, the minister said.

The amendment defines resident individuals and non-resident individuals as two types of taxpayers. In addition, the length of time used to distinguish between the two groups will be adjusted to 183 days from the previous 365.

"This will help establish tax jurisdictions and safeguard national tax rights and interests," Liu said.

The amendment also adds an anti-tax avoidance clause, empowering tax authorities to adjust taxation in a reasonable way when individuals transfer property in violation of independent trading.

Individuals will also be subject to the clause when they evade taxes in overseas tax havens or obtain improper tax benefits by organizing unlawful commercial activities.

The individual income tax was the third major contributor to China's total tax revenue, following value-added tax and enterprise income tax. In 2017, China collected individual income taxes worth nearly 1.2 trillion yuan, about 8.3 percent of the total tax revenue.

The current law has undergone seven revisions since it was enacted in 1980, when the original threshold for individual income tax exemption was 800 yuan per month.

It was raised to 1,600 yuan in 2005 and 2,000 yuan in 2007. The current threshold is 3,500 yuan according to the revision made in 2011.



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