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The Standing Committee of China's National People's Congress adopted an amendment to the Individual Income Tax Law (the "IIT Law") on 30 June 2011 which will come into force on 1 September 2011.
The amended IIT Law raises the threshold of tax exemption for individual income from monthly wages and salaries of RMB2,000 to RMB3,500.
The tax rate schedule for wages and salaries income is also amended under the amended IIT Law, where the original nine brackets under the progressive tax rates system are cut to seven, and the tax rate under the first bracket is reduced from 5% to 3%. A comparison of the tax rate schedules for wages and salaries income before and after the amendment is shown as follow:
Before:
|
Grade |
Monthly Taxable Income |
Tax Rate (%) |
|
1 |
the part below RMB500 |
5 |
|
2 |
the part in excess of RMB500 to RMB2000 |
10 |
|
3 |
the part in excess of RMB2000 to RMB5000 |
15 |
|
4 |
the part in excess of RMB5000 to RMB20000 |
20 |
|
5 |
the part in excess of RMB20000 to RMB40000 |
25 |
|
6 |
the part in excess of RMB40000 to RMB60000 |
30 |
|
7 |
the part in excess of RMB60000 to RMB80000 |
35 |
|
8 |
the part in excess of RMB80000 to RMB100000 |
40 |
|
9 |
the part in excess of RMB100000 |
45 |
After:
|
Grade |
Monthly Taxable Income |
Tax Rate (%) |
|
1 |
the part below RMB1500 |
3 |
|
2 |
the part in excess of RMB1500 to RMB4500 |
10 |
|
3 |
the part in excess of RMB4500 to RMB9000 |
20 |
|
4 |
the part in excess of RMB9000 to RMB35000 |
25 |
|
5 |
the part in excess of RMB35000 to RMB55000 |
30 |
|
6 |
the part in excess of RMB55000 to RMB80000 |
35 |
|
7 |
the part in excess of RMB80000 |
45 |
Employers are reminded to pay attention to the changes introduced by the amended IIT Law and shall make sure that the new requirements are complied with in acting as the tax withholding agents for employees.
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