China: Proposed individual income tax reform – the most significant revamp in 38 years

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July 2018

A Draft Amendment to the Individual Income Tax Law (IIT Law) had a first review during the Third Session of the Standing Committee of the 13th National People’s Congress (NPC). On 29 June 2018, the Draft Amendment was posted on the NPC’s website to solicit public opinion until 28 July 2018.

The key changes that may affect individuals and/or companies in the global mobility arena include:

  • revising the criteria for determining tax residency status
  • implementing a mixture of aggregate and schedular taxation system to replace the current schedular taxation system
  • amending the tax rates and taxable income brackets
  • increasing the standard basic deduction and introducing additional specific deductible items
  • introducing a unique taxpayer identification number, and
  • introducing an anti-tax avoidance rule.

The proposed changes, if passed, will signify an overhaul of the current IIT system.

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