The Ministry of Finance and State Administration of Taxation Soliciting Public Opinions on the 'Provisional Measures for the Specific Additional Deductions for IIT Purpose' (the "Provisional Measures") (the "Consultation Draft")

20 October 2018

The Ministry of Finance and State Administration of Taxation jointly released the Consultation Draft to solicit public opinions on 20 October 2018. The Provisional Measures specified the general principles, specific deductible amount and deduction methods for six major expenses, the relevant administrative rules, etc. The deadline of soliciting public opinions is 4 November 2018. The Provisional Measures will be effective from 1 January 2019.

Abstract

To implement the new IIT Law promulgated on 31 August 2018, the MOF and SAT have jointly released the Consultation Draft to solicit public opinions.

The Provisional Measures set forth general principles, specific deductible amount and deduction methods for six major expenses, i.e. children's education, continued education, severe diseases, mortgage interests, rental expense, and elderly care respectively, as well as the relevant administrative rules.

1. Children's Education

   RMB 12,000 per year per child (RMB 1,000 per month per child). Both parents can deduct 50% or one parent can deduct 100%, including pre-school education and academic education.

2. Continued Education

   Whilst receiving continuing education, RMB 4,800 per year (RMB 400 per month during the academic education period). For the year receiving the relevant professional certificate, RMB 3,600 per year.

3. Major illness medical treatment

   Major illness medical treatment expense is expense exceeding RMB 15,000 of the self-paid part of the Social Health Insurance (including diseases not covered in the Medical Insurance Catalogue). Capped at RMB 60,000 per year.

4. Mortgage Interests

   If the taxpayer or spouse purchases the first house using loans from commercial banks or housing fund, whilst repaying the loans, the loan interests is deductible up to RMB 12,000 per year (RMB 1,000 per month)

5. Rental Expense

   If the taxpayer and spouse do not own a house in their working city, the rental expense can be deducted as follows:

   • In major cities, RMB 14,400 per year (RMB 1,200 per month).
   • In other cities of which the population is over one million, RMB 12,000 per year (RMB 1,000 per month).
   • In other cities of which the population is below one million, RMB 9,600 per year (RMB 800 per month).

6. Elderly Care

   RMB 24,000 per year for expenses supporting parents over 60 years old or other legal dependents. The deduction is shared amongst the children and an only child would have the entire deduction.