Laws of the People's Republic of China

Article 1: An individual who is domiciled within the borders of China or who is not domiciled, but lives within the borders of China for no less than one year shall pay personal income tax on any income obtained from within or outside of Chinese borders according to the stipulations hereof. An individual who neither is domiciled nor lives within the borders of China or who is not domiciled and lives within the borders for less than a year shall pay personal income tax on any income obtained from within Chinese borders according to the stipulations hereof.

Article 2: The following personal incomes shall be taxed:

2. 1. Wages and salaries;

2.2. Operating income of privately owned businesses;

2.3. Income from contracted management or leasehold management for enterprises or institutions;

2.4. Remuneration for labor services;

2.5. Income from author's remuneration;

2.6. Income from franchise royalties;

2.7. Interest, dividends, and bonuses;

2.8. Income from the lease of property;

2.9. Income from the assignment of property;

2.10. Accidental income;

2.11. Any other income deemed taxable by the Finance Department of the State Council.

Article 3: Personal income tax rates:

3.1. Progressive tax rates in excess of specific amounts shall apply to wages and salaries, the rates being five percent to 45 percent (refer to the tax rate schedule attached).

Progressive tax rates in excess of specific amounts, at five percent to 35 percent, shall apply to the operating income of privately owned businesses and income from contracted management or leasehold management for enterprises or institutions (refer to the tax rate schedule attached).

3.3. A proportional tax rate of 20 percent shall apply to income from author's remuneration with 30 percent of the taxable income being tax exempt.

3.4. A proportional tax rate of 20 percent shall apply to income from remuneration for labor services; for exceptionally high one‑off income from remuneration for labor services, the tax rate can be marked up. Detailed procedures shall be determined by the State Council.

3.5. A proportional tax rate of 20 percent shall apply to the income from franchise royalties, interest, dividends, bonuses, income from the lease of property, income from the assignment of property, accidental income and any other types of income.

Article 4: The following personal incomes are exempt from personal income tax:

4.1. Pecuniary awards in such areas as science, education, technology, culture, health, sports, and environmental protection, bestowed by the provincial‑level people's government, ministries and commissions of the State Council, units at or above the level of Army Commander in the Chinese People's Liberation Army, foreign organizations or international institutions;

4.2 Interest from national government bonds or financial bonds issued by the state;

4.3. Subsidies and allowances given in accordance with the unified regulations of the state;

4.4. Welfare benefits, survivor's pensions, and relief payments;

4.5. Insurance compensation;

4.6. Military severance pay and demobilization pay for servicemen and servicewomen;

4.7. Relocation allowances, severance pay, retirement pay, retirement pay for veteran cadres, and living allowances for retired veteran cadres in accordance with the unified regulations of the state;

4.8. Income of diplomatic representatives, consular officers, and other personnel of foreign embassies and consulates in China entitled to tax exemption as provided for in the applicable law of the state;

4.9. Income that is tax free as stipulated in the international conventions entered into or agreements signed by the Chinese government;

4. 10. Income that is tax free as approved by the Finance Department of the State Council;

Article 5: In one of the following cases, personal income tax may be abated after approval:

5.1.Where it involves the income of the disabled, or elderly persons or family members of a martyr;

5.2. Where a serious natural disaster causes major losses;

5.3. Where tax abatement has been approved by the Finance Department of the State Council under other circumstances;

Article 6: Calculation of taxable income:

6.1. For income from wages and salaries, the balance of monthly income after deduction of RMB 800 (US$97) in expenses is the taxable income.

For the operating income of privately owned businesses, the balance of the total income in each tax year after deduction of costs, expenses, and losses is the taxable income.

6.3. For income from contracted management or leasehold management for enterprises or institutions, the balance of the total income in each tax year after deduction of necessary expenses is the taxable income.

6.4. For income from the remuneration of labor services, income from author's remuneration, income from franchise royalties, and income from the lease of property, if the income received each time does not exceed RMB 4,000 (US$484), then RMB 800 (US$97) is deductible as expenses; if it exceeds RMB 4,000, 20 percent shall be deducted as expenses. The balance in each case is the taxable income.

6.5. For income from the assignment of property, the balance of the income from such assignment after deduction of the original value of the property and reasonable expenses is the taxable income.

6.6. For income from interest, dividends, bonuses, accidental income and other income, the amount received each time is the taxable income. Personal contributions to education and other undertaldngs for the public good shall be deducted from the taxable income in accordance with the relevant regulations of the State Council.

For those taxpayers who are not domiciled within Chinese borders, but receive wages and salaries from within Chinese borders, and those taxpayers who are domiciled within Chinese borders, but receive wages and salaries from outside of the Chinese borders, additional deductible expenses may be determined according to their average income level, living standard, and foreign exchange rate fluctuation. The scope of application and scale of such additional deductible expenses shall be stipulated by the State Council.

Article 7: For income received by a taxpayer from outside Chinese borders, he or she shall be allowed to deduct from his taxable amount any personal income tax already paid outside Chinese borders, provided that such deduction does not exceed the taxable amount of the income received by this taxpayer from outside the borders as calculated according to the stipulations hereof.

Article 8: For the purpose of personal income tax, the income earner is the taxpayer, and the unit or individual paying such income is the withholding agent. Taxpayers who receive wages and salaries from two or more sources and who have no withholding agents shall file returns and pay taxes of their own accord.

Article 9: The tax money deducted by the withholding agent each month and the tax money payable by the self‑declared taxpayer should be paid into the state treasury within the first seven days of the following month. Tax returns shall be submitted to the tax authorities.

The tax money payable on wages and salaries shall be calculated and paid on a monthly basis and shall be paid into the state treasury by the withholding agent or taxpayer within the first sevendays of the following month. And tax returns shall be submitted to the tax authorities. The tax money payable on wages and salaries in certain industries may be calculated on a yearly basis and paid by advance monthly payment. The detailed procedures shall be stipulated by the State Council.