New Deduction Standard applied in Beijing comparing to 2000 RMB in other areas

Posted by on October 13, 2011 under Hwuason News, Individual Income Tax | Be the First to Comment

As reported by some media that Shanghai, Xiamen and Tangshan still collects IIT upon deduction of 2000 RMB, the reporter heard from Beijing local bureau that Beijing city already implement the new deduction standard of 3500 RMB.
12366 hotline confirmed that Beijing Online Tax System has already been updated to the newest laws and taxpayer are entitled to report any company still accord to the 2000 standard as illegal. The ignorance of new tax law in other regions reflects the public credibility of policies from central government and need to be solved in some useful way.
To solve the problem, Liu said that it’s possible to negotiate with local tax bureau to get a tax refund after, specifically, the refund money will be deducted from later tax rather than a full amount refund in form of cash, which is more applicable as the tax paid to the tax bureau is already transferred to financial departments.

New individual income tax law application on wages and salaries

Posted by on October 12, 2011 under Individual Income Tax | Be the First to Comment

On June 30 2011, the individual income tax law is amended by the sixth time. Subsequently, the implement rule of individual income tax law is amended by the third time on 19 July 2011. According to the latest rules, wages and salaries income should apply new regulations since September 1 2011, then how it is executed in practice?
According to SAT officer’s introduction, SAT issued Circular on implementing new individual income law (Circular No 46), and its policy unscramble documentation on SAT website. In accordance with tax law and circulars, wages and salaries income gained after September 1 2011 should apply new tax rate rules. For example, enterprise pay wages and salaries to staffs and withhold tax in August, no matter which month wages and salaries belong to, it should apply 2000 Yuan deduction standard and old tax rate. Likewise, once the wages and salaries are paid in September, it should apply 3500 Yuan deduction standard and new tax rate. To some enterprises that delay payment time from August to September intentionally and pay September salaries at the end of September, enterprises should merge two months salaries, minus 3500 Yuan uniformly with housing fund, pension and so on, and apply new tax rate to calculate tax.
Regarding to withholding individual income tax, according to article 9 of individual income tax law, tax on wages and salaries income should be paid by month by withholding agent before 15 of next month. Tax authorities paid high attention to the individual income tax law amendment and implement, and noticed some misleading reports. SAT officer emphasizes that the policy link is unified and explicit, local tax authorities should implement new rules seriously, enhance tax publicity, answer enquiries seriously, and collect tax in law. Meanwhile, officer reminds tax payers and withholding agents to understand relevant rules in depth and pay tax in law.

High-income earners to pay more

Posted by on August 24, 2011 under Individual Income Tax | Be the First to Comment

Source: Global Times [04:39 April 19 2011]

By Fang Yunyu


The government will generate more revenue by strengthening taxation management on high-income earners and covering loopholes in the existing system, the State Administration of Taxation announced Sunday.

High-income earning expatriates working in China, middle and senior management staff involved in industries such as real estate, securities and private-equity funds, as well as film and music industry professionals and celebrities who generate income from advertisements and performances, are all on the key list of tax collection tightening practices, according to the taxation authority.

The announcement came as China’s Standing Committee of the National People’s Congress prepares for official meetings later this week to review the draft amendment on the personal income tax law.

With inflation at stubbornly high levels, expectations are that the starting level to be taxed on personal income may be raised from 2,000 yuan ($306) to 3,000 yuan per month.

“Enhancing taxation supervision on high-income earners and raising the cut-off point are actually two sides of a coin, which all aim to realize fair taxation,” said Liu Tianyong, a partner at Beijing-based Hwuason Law Firm, which specializes in taxation law. Liu is also a guest professor at Beijing’s Central University of Finance and Economics’ school of taxation.

Liu said supervising the personal income data of all residents, which involve huge numbers of people that are scattered across a vast geographic area, may prove difficult for tax authorities.

“And our current income taxation system is in need of (a broader range) of different tax rates,” he said.

He cited as an example that the current guidelines impose the same tax rates on a person that makes 8,000 yuan in monthly income as they do a resident that makes 20,000 yuan per month.

The Ministry of Finance announced back in February that China’s total tax revenue grew by 23 percent over 2009 figures to 7.32 trillion yuan ($1.17 trillion). While personal income tax revenue rose by 22.5 percent to 483.7 billion yuan, accounting for 6.6 percent of total tax revenues.

According to the 2009 “tax misery index” released by Forbes magazine, China ranked second in “imposing the harshest taxes,” right behind France. But when it comes to corresponding social benefits, China still has a long way to go, compared to the West.



Advising on Individual Income Tax Law Retained by ACLA

Posted by on under Individual Income Tax | Be the First to Comment

The government will likely raise the personal income tax threshold and adjust related tax brackets to try to create a fairer income distribution system. Personal income tax accounts for 6.6 percent of China’s overall tax revenue. More than 65 percent of personal income tax is paid by those with medium and low incomes. The goal of the tax, to reduce the wealth gap, has lost its original function. The new expected personal income tax threshold of 3,000 yuan income a month rather than the current one of 2,000 yuan a month is based on the country’s average basic cost-of-living expenses.

In the meantime, debate has surfaced over all kinds of issues concerning fairness, tax burden, adjustments and so on. Opinions gathered by the NPC have reached 100,000 pieces, including both profound thoughts and controversial ideas. As retained by ACLA, Hwuason has represented lawyer profession, as a tax law expert, to give legislative ideas on the issue. The final ideas mainly encompass deduction standards, unifying residential and non-residential incomes taxes, restricting usage of verification collection methods, adjusting the withholding subjects, and strengthening IIT collection, etc.

All China Lawyers Association (ACLA)

Based on “the Interim Regulation of Lawyers of the People’s Republic of China”(issued in 1980), the All China Lawyers Association (ACLA), founded in July of 1986, is a social organization as a legal person and a self-disciplined professional body for lawyers at national level which by law carries out professional administration over lawyers. All lawyers of the People’s Republic of China are members of ACLA and the local lawyers associations are group members of ACLA. At present, ACLA has 31 group members, which are lawyers associations of provinces, autonomous regions and municipalities and nearly 110,000 individual members.

The aim of the ACLA is to unite and educate its members to protect the dignity of the Constitution and law; to be faithful to the legal profession and abide by professional ethics and rules of conduct; to defend lawful rights and interests of its members; to enhance professional competence of lawyers; to strengthen professional self-regulation in order to promote sound development of the legal profession and endeavor to build up socialist state with rule of law and to develop social civilization and progress.

Interviewed By China Business

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Systematic Reform Called by China Tax Law———behind 500 yuan difference

On June 30, NPC voted for the decision of amending IIT Law, raised the former determined 3000 yuan ( in second draft context) to 3500 yuan, and changed the first stage rate from 5% to 3%.

As the IIT Law is finally a closed case, yet the reform process is still open for discussion and a systematic IITtax reform is needed.

IIT act stands at the top of China popular will

The final version differs from initial drafts at some point, experts say that this might be related to the massive poll conducted by NPC. Other than 200,000 pieces of advice from the common folksy, departments of NPC also listened to persons with typical social identity from all kinds of areas, professions and ranks. Though it was stated that the popular opinion will not affect the legislative process, it was clear that the legislators have considered such opinions.

The direction: tax reform

Liu Tianyong: When systematic reform is not available in the near future, we can benefit most people earlier by single amendment, yet the long term tax reform will eventually change the differentiate treatment on income distribution.

How to implement

Liu delivered his opinion as: though a comprehensive and verified declaration system is most scientific, and can achieve the goal of fairness, reasonability and transparent, it has a risk of inconsistency with our current withholding regime. Under this situation, feasibility became a very important factor.