Individual Income
Tax (II)
Fiona Y. Guan @CUHK
Scope of Taxation 徵稅範圍 Calculation Frequency Tax Rate
Wages and salaries 工資、薪金所得 For residents, tax is calculated on
comprehensive income on an annual basis
Service income 勞務報酬所得 ( 按年計徵 ). Allowable deductions;
Progressive
Manuscripts 稿酬所得 (3% – 45%)
income
Royalties 特許權使用費所得
Income from 經營所得 Annual 按年計徵 Allowable deductions;
business operations Progressive
(5% – 35%)
Interests, dividends 利息、股息、紅利所得 Single receipt 按次計徵 No deductions;
and bonuses Flat rate at 20%
Rental income 財產租賃所得 Monthly 按月計徵 Allowable deductions;
Flat rate at 20%
Income from 財產轉讓所得 Single receipt 按次計徵 No deductions;
transfer of property Flat rate at 20%
Incidental income 偶然所得 Single receipt 按次計徵 No deductions;
Flat rate at 20%
Part One:
Income from Business Operations ( 經營所得 )
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Taxable Income: Income from Business Operations
In general, an individual operating business and who has a business
license from the State Administration for Market Regulation ( 國家市場監督管理
總局 ) will be taxed under income from business operations.
• Private-owned household enterprises ( 個體工商戶 )
• Sole-proprietorships ( 個人獨資企業 )
• Partnerships ( 合夥企業 )
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Private-owned household
enterprises ( 個體工商戶 )
• Private-owned household enterprises: individual entrepreneurs operating
small businesses, i.e., businesses which are NOT separate legal entities in
their own right and which employ less than eight employees.
• Can be funded by an individual
or the whole household;
• “ The Civil Law” ( 民法通則 ) applies.
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Sole-proprietorships ( 個人獨資企業 )
• Sole proprietorship: a type of enterprise owned and
run by one person and in which there is no legal
distinction between the owner and the business
entity.
• The sole owner pays IIT on profits earned from the
business, receive all the remaining profits,
has unlimited responsibility for all losses and debts.
• The Individual Proprietorship Enterprises Law ( 個人獨資
企業法 ) applies.
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Partnerships ( 合夥企業 )
• Partnerships: in contrast with a sole proprietorship , partnership is a formal
arrangement by two or more parties to manage and operate a business and
share its profits.
• Professionals like doctors/lawyers often form a limited liability partnership.
• Individual partners are required to pay IIT on income
derived from the partnership (Caishui (2008) 159).
• “Partnership Enterprise Law” applies.
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Difference between private-owned household enterprises and sole proprietorship
(NOT required): https://zhuanlan.zhihu.com/p/138968283
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Partnerships ( 合夥企業 )
Partnership income shall be allocated and taxed( 先分後稅 ) regardless of
whether it has been distributed.
In accordance with Caishui (2000) 91 and Caishui (2008) 65, a partner’s
taxable income will be allocated in the following order:
• according to the partnership agreement
• according to a subsequent agreement if the existing partnership
agreement is silent or unclear
• according to the partner’s contribution
• according to the number of partners (pro-rata)
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Taxable Income: Income from
Business Operations
• Individual income tax on income from business operations is calculated
on an annual basis;
• Deductible items (DETAILS ARE NOT REQUIRED):
• Costs and expenses related to business operations on an accrual basis.
• Taxes (deductible taxes stipulated by the government).
• Losses (e.g., asset losses) mean that business operations cause shortage or
damages on non-current asset or inventory loss, loss on transfer of properties,
bad debt written-off, losses incurred due to natural disasters and other force
majeure factors.
• Other expenditures refer to relevant and reasonable expenses that incurred
during business operations apart from cost, expenses, taxes and losses.
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Non-deductible Items 哪些支出不得在經營所得個人所得稅稅前扣除？
一、個人所得稅稅款 ;
二、稅收滯納金；
三、罰金、罰款和被沒收財物的損失 ;
四、不符合扣除規定的捐贈支出 ;
五、贊助支出 ;
六、用於個人和家庭的支出 ;
• 這些經營體生產經營活動中，應當分別核算生產經營費用和個人、家庭費用。
• 個體工商戶 : 對於生產經營與個人、家庭生活混用難以分清的費用，其 40% 視為與生產經營有關費用，准予扣除。
• 個人獨資企業和合夥企業的投資者及其家庭發生的生活費用與企業生產經營費用混合在一起，併且難以劃分的，全部視為投資者個人及其家庭發生的生活費用，
不允許在稅前扣除。
• 個人獨資企業、合夥企業的個人投資者以企業資金為本人、家庭成員及其相關人員支付與企業生產經營無關的消費性支出及購買汽車、住房等財產性支出，視
為企業對個人投資者的利潤分配，併入投資者個人的生產經營所得，依照“經營所得”項目計徵個人所得稅。
七、與取得生產經營收入無關的其他支出 ;
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八、投資者工資薪金支出。
• “ 既然錢都是自己的，無論放在公司還是自己的賬戶裏，都沒有什麽區別。” 有些規模不大的私企往往沒有自己的財務監管人
員。企業主缺錢用便從公司賬目上提取，甚至自己的配偶、子女也可隨便從公司賬目上提取現金用作個人消費支出，再列入公
司賬目“差旅費”、“管理費”等科目。
• A 是某服裝廠的老板，由于家庭需要便從公司提取了 25 萬買車，但汽車登記在他自己的名下。後來稅務機關查出這壹賬目，
不允許稅前扣除， A 不僅補交了所得稅還被處罰；
• B 是私企老板 , 用公司名義購買私人物業，不幸公司破産，私人物業也被用作公司財産償還債務。
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Simplified Example
• A self-proprietorship
• Revenue: 50m
• Total cost: 20m, including salary to the owner --2m, a luxury bag
purchased for the owner’s wife 0.2m, maintenance cost of car owned
and used by the owner’s son who is still attending university -- 0.1m
• Question: how much is the taxable income of this self-proprietorship?
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為什麽此類小企業投資者工資薪金支出不得在經營所得個人所得稅稅前扣除？
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Calculation of Tax:
Income from Business Operations
𝑨𝒏𝒏𝒖𝒂𝒍 𝒕𝒂𝒙 𝒑𝒂𝒚𝒂𝒃𝒍𝒆=[ ( 𝑨 − 𝑩 ) × 𝑪 ] − 𝑫
Where:
A = gross business income
B = allowable deductions
C = applicable tax rate
D = quick deduction factor
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Tax Rate Table for Income from
Business Operations
Level Annual Taxable Income (RMB) Rate (%) Quick Deduction Factor
(RMB)
1 Up to and including 30,000 5 0
2 Over 30,000 to 90,000 (included) 10 1,500
3 Over 90,000 to 300,000 (included) 20 10,500
4 Over 300,000 to 500,000 (included) 30 40,500
5 Over 500,000 35 65,500
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Calculation of Tax:
Income from Business Operations
• An individual who obtains income from business operations without
comprehensive income shall deduct 60,000 yuan of expenses, special deductions,
special additional deductions and other deductions when calculating the taxable
income for each tax year.
• 取得經營所得的個人，沒有綜合所得的，計算其每一納稅年度的應納稅所得額時，應當減除費用 6 萬元、專項扣除、專項附加扣除
以及依法確定的其他扣除。
• For an individual who obtains income from business operations with comprehensive
income, the allowable deductions can be used to offset either the comprehensive
income or income from business operations.
• 取得經營所得的個人，又有綜合所得的，扣除二選一。
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Illustration
Sam and Susan started their equal partnership in January 2019. The
result of 2019 was as follows:
RMB
Sales 1,000,000
Costs and expenses excluding salaries to Sam and Susan (600,000)
(all deductible)
Salaries of Sam (20,000 x 12 months) (240,000)
Salaries of Susan (20,000 x 12 months) (240,000)
Net income/loss in 2019 (80,000)
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Scenario #1: Calculate the individual income tax of Sam for 2019. Assume
Sam has no comprehensive income or any IIT specific/additional deductions.
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Scenario #2: Calculate the individual income tax of Sam for 2019. Assume Sam’s
comprehensive income for the tax year is MB70,000 and specific/additional deductions
totaled RMB12,000.
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Employee Comprehensive Income
(Wages and Salaries)
Independent Contractor Comprehensive Income
(Service Income)
Celebrity Studio Income from
Business Operations
>> change the nature of income for tax
planning/avoidance/evasion
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Case: Yin-Yang Contracts
• According to the Shanghai Municipal Tax Service, Zhang (Zheng’s agent) and
the producer of the TV series discussed the split of Zheng's salary and the
way to receive it, and planned the details of the operation. The 160 million
yuan wage was paid by the producer to Zheng's company: 48 million yuan in
the form of the company revenue, and 108 million yuan in the form of
"capital increase."
• 經查，鄭爽於 2019 《》 1.6 億元，實際取得 1.56 億元，分為兩個部分收取。其中，第一部分 4800 萬
元，將個人片酬收入改變為企業收入進行虛假申報、偷逃稅款；第二部分 1.08 億元，製片人與鄭爽實際控制公司簽
訂虛假合同，以“增資”的形式支付，規避行業監管獲取“天價片酬”，隱瞞收入進行虛假申報、偷逃稅款。
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Tax Planning? Tax Avoidance? Tax Evasion?
海南
核定徵收
Verification Collection
霍爾果斯
查賬徵收
武隆 Audit Collection
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Verification Collection 核定徵收
Question: In what circumstances is verification collection method used?
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• 问 : 黄薇 (Viya) 的违法事实有哪些？
• 答 : 2019 年至 2020 年期间，黄薇通过隐匿其从直播平台取得的佣金收入虚假
申报偷逃税款；通过设立上海蔚贺企业管理咨询中心、上海独苏企业管理咨询合伙企
业等多家个人独资企业、合伙企业虚构业务，将其个人从事直播带货取得的佣金、坑
位费等劳务报酬所得 (service income) 转换为企业经营所得 (income
from business operations) 进行虚假申报偷逃税款。
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Part Two:
Other Classified Collection Items ( 分類所得 )
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Scope of Taxation 徵稅範圍 Calculation Frequency Tax Rate
Wages and salaries 工資、薪金所得 For residents, tax is calculated on
comprehensive income on an annual basis
Service income 勞務報酬所得 ( 按年計徵 ). Allowable deductions;
Progressive
Manuscripts 稿酬所得 (3% – 45%)
income
Royalties 特許權使用費所得
Income from 經營所得 Annual 按年計徵 Allowable deductions;
business operations Progressive
(5% – 35%)
Interests, dividends 利息、股息、紅利所得 Single receipt 按次計徵 No deductions;
and bonuses Flat rate at 20%
Rental income 財產租賃所得 Monthly 按月計徵 Allowable deductions;
Flat rate at 20%
Income from 財產轉讓所得 Single receipt 按次計徵 No deductions;
transfer of property Flat rate at 20%
Incidental income 偶然所得 Single receipt 按次計徵 No deductions;
Flat rate at 20%
Taxable Income:
Interest, Dividends and Bonuses
• Interest, dividends or bonuses received by an individual from loan credits
and equity shares are subject to individual income tax on a gross income
basis (IITIR, Art 8(7)). No deductions or allowances are available for such
income.
𝑇𝑎𝑥 𝑝𝑎𝑦𝑎𝑏𝑙𝑒= 𝑓𝑢𝑙𝑙𝑎𝑚𝑜𝑢𝑛𝑡 𝑜𝑓 𝑝𝑎𝑦𝑚𝑒𝑛𝑡 × 20 %
Note: Interest income received by individuals from bank deposits in
China is currently not taxable. (NOT REQUIRED)
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Taxable Income: Rental Income
• Rental income derived by an individual from leasing out property is
subject to individual income tax. Properties in respect of which
taxable rental income may be derived include both immovable real
properties and movable properties, namely:
• Buildings
• Land-use rights
• Machinery and equipment
• Vehicles and vessels
• Other properties (IITIR, Art 8 (8))
• Rental income is subject to a flat rate of 20%.
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Taxable Income: Rental Income
Case #1 ： every monthly receipt <= RMB4,000
• Taxable rental income = every monthly rental income – statutory deductions –
repairment expenses (up to a maximum of RMB800) - 800
應納稅所得額 = 每月收入額 - 准予扣除項目 - 維修費用 (800/ 月為限 )-800 元
Case #2 ： every monthly receipt > RMB4,000
• Taxable rental income = [every monthly rental income – statutory deductions –
repairment expenses (up to a maximum of RMB800)] * (1-20%)
應納稅所得額 = 【每月收入額 - 准予扣除項目 - 維修費用 (800/ 月為限 ) 】 ×(1-20%)
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Taxable Income: Income from
Transfer of Property
Income (to be more precise, gain) derived by an individual from the sale of
immovable real properties or movable properties is subject to individual
income tax. Taxable income may be derived through the assignment of:
• Marketable securities
• Equity shares (with some exemptions)
• Share of property in partnership
• Real estates
• Machinery and equipment
• Vehicles and vessels, etc.
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Taxable Income: Income from
Transfer of Property
• Gains from the sale of personal property in China will be subject to a
mandatory individual income tax of 20%;
• Taxable gains = the gross sales proceeds – allowable deductions
(original value of the property, transaction-related taxes, and
reasonable expenses)
• Reasonable expenses refer to the actual house remodeling expenses,
mortgage interests, commission charges, notary fees, and other fees
paid by taxpayers according to the regulations. (NOT REQUIRED)
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Taxable Income: Incidental
Income
• “Incidental income” is income received by an individual by way of winnings,
awards or other “windfall” income.
• Individual income tax is levied on each receipt of such income. No
deductions are available for incidental income.
• Exemptions: e.g., a single receipt income ( 一次中獎收入 ) for China welfare
lottery ( 中国福利彩票 ) equal to or less than RMB10,000; otherwise in full at a
rate of 20%.
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https://www.youtube.com/watch?v=BZL_2F1_hZY
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該《》
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Part Three:
Selected Preferential IIT Policies
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W&S: Tax Exemption of Fringe Benefits
• Mandatory Social Insurance and Housing Fund ( 五險一金 ) contributed by
the employer;
• (reasonable) travel allowance 差旅費津貼 ;
• (reasonable) meal allowance 誤餐費 ;
• One child subsidy 獨生子女補貼 ;
• (reasonable) child care subsidy 托兒補助費 , etc.
个人取得补贴、补助是否缴纳个人所得税_税 屋——第一时间传递财税政策法规！ (shui5.cn) (NOT REQUIRED)
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Tax Exemption of Certain Individual
Income(cont’d)
• Monetary awards granted by provincial People’s Governments, State Council
ministries and commissions, units of People’s Liberation Army at army level or
above, or by foreign or international organizations for stipulated purposes.
• Interest on State bonds , interest on bank deposits, insurance compensation,
etc.
2023年个人所得税优惠政策(二)免税收入篇 - 专业文章 - 上海市锦天城律师事务所 (allbrightlaw.com) (NOT REQUIRED)
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Preferential IIT Policies: Separation of Income
• Lump-sum year-end bonus;
• Stock incentives, including restricted stocks, stock appreciation rights,
stock options, and stocks;
• Severance payments;
• Employers selling housing to employees at cost below market value.
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Preferential IIT Policies: Dividend
Part A: Dividend for stocks obtained from open market (IPO or secondary) held by individuals
Holding period by the individual investor Taxable income subject to tax Effective tax rate
100% of the taxable income 20%
50% of the taxable income 10%
exempt 0
Part B: Dividend for restricted stocks internally obtained from companies held by individuals
During the lock-up period 50% of the taxable income; effective tax rate: 10%
After the lock-up period The same as part A (depending on the holding period)
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• 2022 年 10 月 27 日 , “ 羊了个羊”背后公司厦门吉比特网络技术股份有限公司发布三季度利润分配 :2022 年 1-9
月合并报表归属于母公司股东净利润 1,011,727,678.53 元 , 向全体股东拟派发现金红利 1,006,130,748.00
元 ( 含税 ), 占利润比 99.45% ！
• 公司实控人卢竑岩占股 30.1%, 这也就意味着如果按照股东占股比例进行分配 , 仅凭这次分红 , 他就能分走 3 个亿！
• 由于卢竑岩所持股票自解禁日起持股已经超过 1 年 , 因此无需缴纳股息红利所得个人所得税！
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Preferential IIT Policies
• A tax exemption is currently granted for gains from the transfer of
shares obtained from open market (IPO/secondary) by individuals
(Caishuizi (1998) 61).
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Scope of Taxation IIT 徵稅範圍
Discussion: Comment on the tax burden
Wages and salaries 工資、薪金所得 of billionaires in mainland China ？
Service income 勞務報酬所得
Manuscripts 稿酬所得
income
Royalties 特許權使用費所得
Income from 經營所得
business operations
Interests, dividends 利息、股息、紅利所得
and bonuses 劳动致富？
Rental income 財產租賃所得
资本致富？
Income from 財產轉讓所得
transfer of property 运气致富？
Incidental income 偶然所得
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Discussion
Dividend
(holding shares)
Income from transfer of property
(selling shares)
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Part Four:
IIT-related Contemporary Issues
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Taxpayers Taxable Income
Residents • Global Income (China-sourced income and foreign-
sourced income)
Non-residents • China-sourced income
Residence Principle + Territorial Source
Principle
屬人兼屬地原則
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Salary Tax
Hong Kong SAR adopts a
territorial basis of taxation.
A person’s residence, domicile
or citizenship is not relevant in
determining liability to Hong
Kong salaries tax under the
domestic law.
Only income/profits which
have a source in Hong Kong
are taxable here.
Income/Profits sourced
elsewhere are not subject to
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Hong Kong Profits Tax.
Double Taxation ( 重復征稅 )
• Worldwide Tax System ( 稅收屬人兼屬地原則 ): the chargeability to tax is
determined on the residence status and the source basis, e.g. China, U.S.
• Territorial Source Tax system ( 稅收屬地原則 ): the chargeability to tax is
determined on the territorial source of income, e.g., HK SAR
• Double taxation arises when two or more tax jurisdictions overlap,
such that the same item of income or profit is subject to tax in each.
• 不同的納稅主體（即不同國家）對同一納稅人的同一稅源進行的重復征稅，它是由於不同國家在法律上對同一納稅人采取
不同征稅原則，因而產生了稅收管轄權的重疊，從而造成了重復征稅。
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Double Taxation Agreements (DTAs)
• A Double Tax Agreement (DTA), also known as a double tax
treaty, is a bilateral (two-party) agreement made between two
countries to avoid double taxation of income and property.
• The main purpose of a DTA is to modify the tax rights of the
respective jurisdictions. DTAs generally over-ride domestic law.
• Most jurisdictions make provisions for some form of relief from
double taxation either on a unilateral basis under their domestic
tax laws or on a bilateral basis under the double taxation
agreements (DTAs) they have entered into with other
jurisdictions.
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Common Reporting Standard(CRS)
CRS, developed in 2014, is an information standard for the automatic exchange of
information regarding financial accounts on a global level, between tax authorities.
CRS 《》 " 金融賬戶涉稅信息自動交換標準 " ，是 G20 委托經合組織（ OECD ）製定的，目的是通過公約的簽訂，讓締約國之間可以互相交換和披
露對方國家稅收居民在本國的經濟財產狀況，以此提高全球稅收的透明度。
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境外所得个人所得税追征的几个问题
(See link under additional readings)
• Q1 ：哪些人需要就境外所得在中国缴纳个人所得税？
• Q2 ：我已是其他国家 / 地区的永久居民，且长期不在境内，但仍持有中国护照，还需要就境外所得在中国纳税吗？
• Q7 ：炒美股有亏有赚，在申报境外所得时可以扣除亏损吗？
• Q8 ：我的特朗普币账户收入会被征税吗？
• Q9 ：中国税务机关如何获知我的境外所得情况？
• Q16: 我从境外银行购买了各种各样的理财产品，取得的收益都应该在境内纳税吗？
• Q17: 我的境外保险分配给我的分红 / 特定年限或条件达成后的现金提取需要交税吗？
• Q21: 为什么我海外公司的账户信息也会成为税务机关向我追征税款的线索？
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Global Tax
Planning/Avoidance/Evasion
1. 成為一個不征收所得稅、股息稅和資本利得稅的免稅國家的居民
2. 成為一個只對你在其境內賺取的收入征收所得稅和其他稅的國家居民，這樣你就可以合法地保留境外稅收
窪地的收入
3. 转移收入到承诺保护隐私的境外稅收窪地
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Cristiano Ronaldo and Lionel Messi are not just united by their record-breaking
brilliance on the football field. They are also now linked by something far less
palatable: public investigations into their tax affairs.
The multinational appeal of footballers is reflected in the growth of image rights.
Essentially, clubs and sponsors pay for the right to use a player's image—including
everything from his voice to his photograph to his name—in marketing campaigns.
Image-rights income in Spain is taxed at around 20 percent, while income is taxed at
around 43 percent (with slight regional variations). In the cases of Ronaldo, the sale
of his image rights through offshore companies led to accusations that he did so to
avoid taxes on those sales.
Messi and his father have already been found guilty of three counts of tax fraud
between 2007 and '09 for essentially using fictitious companies to avoid Spanish
taxes on income from companies that used Messi's image. Revenues from Messi's
image rights were transferred to Belize and Uruguay, which did not tax companies'
foreign income and also allowed the beneficiary's identity to remain secret.
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Panama Papers
• The Panama Papers refer to the 11.5 million leaked encrypted confidential documents that were the
property of Panama-based law firm Mossack Fonseca. The documents were released on April 3, 2016.
• The Panama Papers are documents that contain personal financial information about many wealthy
individuals and public officials (including current and former world leaders, public officials, celebrities,
etc.) that had previously been kept private.
• Offshore business entities are legal, in general. But some of the shell corporations set up by Mossack
Fonseca were revealed by reporters to have been used for illegal purposes, including fraud, tax evasion
, and the avoidance of international sanctions.
70
TAX HAVENS
OFF-SHORE SHELL COMPANY
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Additional Readings
1. 网络主播涉嫌偷逃税案八问八答
• https://mp.weixin.qq.com/s/bUZz186XC26ajq9QWdrqKg
2. 税收洼地与税收筹划
• 审计署严格清理 “税收洼地”，纳税人税收规划向何处去？ - 金杜律师事务所 - 叶永青 - 余悦 (kwm.com)
3. 金杜律师事务所：境外所得个人所得税追征的几个问题
• https://www.kwm.com/cn/zh/insights/latest-thinking/issues-on-the-collection-of-pers
onal-income-tax-on-foreign-derived-income.html
• https://www.kwm.com/cn/zh/insights/latest-thinking/issues-on-the-coll
ection-of-personal-income-tax-on-foreign-derived-income-part-ii.html
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