21 December 2018
To implement the newly released IIT Law and its Detailed Implementation Rules ("DIRs") in China, the State Administration of Taxation ("SAT") released the above Public Notice on 21 December 2018 setting forth the administrative regulations on Individual Income Tax ("IIT") withholding and reporting in China. The Public Notice includes the IIT withholding and prepayment methods for non-resident wages and salaries, incomes from provision of services, publications and royalties, as well as withholding service fee and relevant IIT and withholding tax rates. The Measures shall take effect from 1 January 2019.
In order to implement the newly revised Individual Income Tax Law and its implementing regulations, the State Administration of Taxation has formulated the Administrative Measures for the Withholding and Declaration of Individual Income Tax (for Trial Implementation), which are hereby promulgated and has come into force as of 1 January 2019.
According to Public Notice No. 61, "Withholding agents" refer to the entities or individuals that pay taxable incomes to individuals. A withholding agent shall withhold and declare individual income tax for all taxpayers and in full amount in accordance with the law.
The taxes withheld by the withholding agent monthly or each time shall be paid before the 15th day of the following month, and the Form of Withholding and Declaration of Individual Income Tax shall be submitted to the tax authorities.
Scope of taxable incomes
Resident individuals
When paying incomes from wages and salaries to a resident individual, a withholding agent shall calculate the withholding tax with the cumulative withholding method and withhold and declare tax on a monthly basis.
When paying to a resident individual the incomes from remuneration for personal services, incomes from author's remuneration and incomes from royalties, the withholding agent shall withhold and prepay tax each time or monthly using the following methods:
The incomes from remuneration for personal services shall apply to Form II of Withholding Rate of Individual Income Tax (see appendix) while the incomes from author's remuneration and the incomes from royalties shall be subject to a withholding rate of 20%.
When a resident individual finally settles the annual comprehensive income, the incomes from remuneration for personal services, the incomes from author's remuneration and the incomes from royalties shall be calculated in accordance with the law and incorporated into the annual comprehensive income to calculate taxes payable, with a refund made for any overpayment or supplemental payment for any deficiency.
Non-resident individuals
When paying to a non-resident individual the incomes from wages and salaries, incomes from remuneration for personal services, incomes from author's remuneration and incomes from royalties, the withholding agent shall withhold and prepay tax each time or monthly using the following methods:
The withholding method of tax within a taxable year for a non-resident individual remains unchanged. When satisfying the conditions for a resident individual, the non-resident individual shall notify the withholding agent of the changes in the basic information and make the final settlement in accordance with the relevant provisions of the resident individual after the end of the year.
When paying the incomes from interest, dividends and bonuses, the incomes from lease of property, the incomes from transfer of property or incidental incomes, the withholding agent shall, in accordance with the law, withhold and pay the tax each time or monthly.
Appendix I - Withholding Rate of Individual Income Tax
(Applicable to the withholding of salaries and wages for resident individuals)
| Bracket | Accumulative taxable income withheld and prepaid | Withholding tax rate（%） | Quick deduction |
|---|---|---|---|
| 1 | Not more than RMB 36,000 | 3 | 0 |
| 2 | Over RMB 36,000 but not more than RMB 144,000 | 10 | 2,520 |
| 3 | Over RMB 144,000 but not more than RMB 300,000 | 20 | 16,920 |
| 4 | Over RMB 300,000 but not more than RMB 420,000 | 25 | 31,920 |
| 5 | Over RMB 420,000 but not more than RMB 660,000 | 30 | 52,920 |
| 6 | Over RMB 660,000 but not more than RMB 960,000 | 35 | 85,920 |
| 7 | RMB 960,000 or above | 45 | 181,920 |
Appendix II - Withholding Rate of Individual Income Tax
(Applicable to the withholding of remuneration for personal services for resident individuals)
| Bracket | Accumulative taxable income withheld and prepaid | Withholding Tax rate（%） | Quick deduction |
|---|---|---|---|
| 1 | Not more than RMB 20,000 | 20 | 0 |
| 2 | Over RMB 20,000 but not more than RMB 50,000 | 30 | 2,000 |
| 3 | RMB 50,000 or above | 40 | 7,000 |
Appendix III - Withholding Rate of Individual Income Tax
(Applicable to the withholding of wages, salaries, remuneration for personal services, incomes from author's remuneration and incomes from royalties for non-resident individuals)
| Bracket | Accumulative taxable income withheld and prepaid | Tax rate（%） | Quick deduction |
|---|---|---|---|
| 1 | Not more than RMB 3,000 | 3 | 0 |
| 2 | Over RMB 3,000 but not more than RMB 12,000 | 10 | 210 |
| 3 | Over RMB 12,000 but not more than RMB 25,000 | 20 | 1,410 |
| 4 | Over RMB 25,000 but not more than RMB 35,000 | 25 | 2,660 |
| 5 | Over RMB 35,000 but not more than RMB 55,000 | 30 | 4,410 |
| 6 | Over RMB 55,000 but not more than RMB 80,000 | 35 | 7,160 |
| 7 | RMB 80,000 or above | 45 | 15,160 |