Decision raises deductible expenses for individual income tax calculation

On 19 July, the State Council announced the Amendment of the PRC Individual Income Tax Law Implementing Regulations Decision. The decision revises the standards for deductible expenses applicable to the payment of personal income taxes by some taxpayers.

Contracting and leasing business

According to the PRC Individual Income Tax Law, for income of an individual derived from contracting or leasing business carried out on behalf of an enterprise or an institution, after necessary expenses are deducted from the total income for each tax year, the balance will be the taxable income amount. Prior to the implementation of the decision, when calculating the taxable amount of income from contracting or leasing business, the deductible necessary expenses were RMB2,000 (US$310) per month. After implementation of the decision, the monthly deductible expenses will be revised to RMB3,500.

Wage and salary income

According to the Individual Income Tax Law, the taxable income of taxpayers who have no residence in China but derive wage or salary income in China, as well as of taxpayers who reside in China and derive wage or salary income from outside China, will be their monthly wage or salary income minus deductible expenses.

Business Law Digest is compiled with the assistance of Haiwen & Partners. The authors can be emailed at baochen@haiwen-law.com. Readers should not act on this information without seeking professional legal advice.