Personal Income Tax Threshold Raised to RMB3,500

Issuance Date: July 1, 2011    Source: People's Daily
  The General Office of the National People's Congress (NPC) held a press conference on the afternoon of June 30 to take questions from reporters on the decision ratified by the 21st Session of 11th NPC Standing Committee on the administrative mandatory law and the revision of the law of personal income tax.
  How do we understand the changes made to the tax exemption amount, tax rate structure as well as many other aspects of the personal income tax law?
  Wang Jianfan, deputy chief of the Department of Tax Administration of the Ministry of Finance said the revision of China's personal income tax law has always adhered to the principle of higher tax for the high-income group, lower tax for the middle-income group, and no tax for the low-income group. The current revisions mainly focus on the following aspects: the rate of fees deduction for salaries and wages rises from RMB2,000 per month to RMB3,500 per month; the pay roll tax rate structure is adjusted to level 7 from previous level 9; the tax rates of 15% and 40% are cancelled, while the lowest rate of 5% is further lowered to 3%; the difference between business operation income tax rate and contract and lease income tax rate of privately-owned businesses is also adjusted; the tax assessable period is extended from 7 days to 15 days.
  He said these revisions will play an active role in people's social life. First, significantly reduce the burden of middle- and low-income taxpayers in various ways. The rate of fees deduction is raised from RMB2,000 to RMB3,500, and the number of taxpayers is reduced from about 84 million to approximately 24 million, which will greatly reduce the tax burden of middle- and low-income taxpayers. At the same time, the tax burden for middle- and low-income groups can be further alleviated via the adjustment to the wage earner income tax rate structure. Second, properly handle the tax requirements on the high-income class. With the rise of fees deduction rate and change of the income tax structure among wage earners, a portion of the high-income group now needs to pay properly higher tax, while enjoying tax reduction due to the rise of fees deduction rate. Third, alleviate the tax burden for privately-owned businesses and contract and lease businesses. Those whose annual taxable income totals no more than RMB60,000 see the largest drop in income tax, with the average drop being 40% and biggest drop 57%. Fourth, the tax assessable period is extended from 7 days to 15 days, which facilitates the tax returns for withholding agents and taxpayers.
  Law amendments usually take effect upon their ratification, but the personal income tax law is required to go into force as of September 1. What considerations is such a decision based on?
  Ms. Liu Lijian, deputy chief of the Department of Income Tax of the Ministry of Finance, responded that the decision was based on two major considerations. On the one hand, from the perspective of legislative procedure, the NPC Standing Committee needs some time to make corresponding revisions to the enforcement regulations of the law after deliberating and ratifying the amendment. The competent department also needs to make preparations for law enforcement in light of the revised personal income tax law and enforcement regulations. On the other hand, as the law has been revised in quite many ways, in order to achieve thorough execution and facilitate the operations of taxpayers and tax collection and management agencies, there still is a large amount of preparatory work to do. For instance, the personal income tax collection and management software, including the tax withholding and remitting software used by more than five million tax withholders and remitters that have made full tax declarations, needs to be altered and tested.
  How do administrative authorities guarantee the rational enforcement of the administrative mandatory law?
  Yuan Shuhong, deputy director of the Legal Affairs Office of the State Council, indicated that the enactment of the administrative mandatory law has a profound influence on strengthening and improving the government work, regulating the government actions, and making innovations in the administrative policy. Governments at different levels must well prepare for law enforcement and take this opportunity to promote administration in strict accordance with the law among administrative agencies and staff at all levels. Specifically, the preparations can be made in six major areas:
  First, the staff of, particularly the leaders and cadres of the administrative agencies must develop a full understanding to the essence of the law, while conscientiously studying and promoting the statute. Second, make vigorous efforts to educate the staff of various administrative agencies, particularly the grassroots law enforcement officials, so that they may know well about the administrative mandatory law and enforce it in their daily work. Third, all regions and competent departments shall hasten to sort out the relevant regulations and regulatory documents according to the requirements of the administrative mandatory law. Revise those which do not conform to the law on a timely basis. Fourth, the competent administrative authorities must develop a specific set of supportive regulations in accordance with the administrative mandatory law and the actual situation. Fifth, the higher administrative authorities shall strengthen the supervision and censorship on the execution of the law, and strictly investigate the responsibility of any parties for any violation. Sixth, increase the efforts to promote administration in accordance with law and accelerate the construction of a government under the rule of law, while taking the opportunity of the completion of the socialist legal system with Chinese characteristics and the full implementation of the basic strategy of the rule of law.

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Personal Income Tax Threshold Raised to RMB3,500