August 2018 / China

The draft decision on amending the personal income tax law was deliberated at the fifth session of the 13th NPC Standing Committee on August 27, 2018. The decision is due to take effect from January 1, 2019, the major amendments for the personal income tax law as followings: Article 1 is amended to read: “A resident individual is an individual who is domiciled in China or who is not domiciled in China but has stayed in the aggregate for 183 days or more of a tax year in China, and shall, in accordance with the provisions of this Law, pay individual income tax on his or her income obtained inside and outside China. “A nonresident individual is an individual who neither is domiciled in China nor stays in China or who is not domiciled in China but has stayed in the aggregate for less than 183 days of a tax year in China, and shall, in accordance with the provisions of this Law, pay individual income tax on his or her income obtained inside China.” Article 6 is amended to read: “Calculation of the amount of taxable income: “(1) For the comprehensive income of a resident individual, the amount of taxable income shall be the balance after subtracting expenses of 60,000 yuan, special deductibles, special additional deductibles, and other deductibles determined in accordance with the law from the amount of income obtained in a tax year. Special deductibles include but are not limited to contributions to the basic pension insurance, basic medical insurance, unemployment insurance, and other social insurance and housing provident funds paid by resident individuals in accordance with the scopes and standards specified by the state. Special additional deductibles include but are not limited to expenditures for education of children, continuing education, medical treatment of serious diseases, housing loan interest, housing rents and raise of elderly (4) For the income from the lease of property, the amount of taxable income shall be the balance after subtracting expenses of 800 yuan from the income if the income is less than 4,000 yuan each time; and the amount of taxable income shall be the balance after subtracting expenses at 20% from the income if the income is 4,000 yuan or more each time. The amount of income from author's remuneration shall be calculated at 70% of the income obtained. The donations made by an individual to the educational cause and other public welfare and charitable causes shall be deducted from the taxable income in accordance with the relevant provisions issued by the State Council. One article is added as Article 14: “Public security, people's bank, financial regulation, and other relevant departments shall assist tax authorities in confirming the identity and bank account information of taxpayers. Education, health, medical insurance, civil affairs, human resources and social security, housing and urban-rural development, people's bank, financial regulation, and other relevant departments shall provide tax authorities with information on special additional deductibles such as education of children, continuing education, medical treatment of serious diseases, housing loan interest, and housing rents of taxpayers. XVI. Schedule 1 of Individual Income Tax Rates (applicable to income from wages and salaries) is amended to read: Schedule 1 of Individual Income Tax Rates (applicable to comprehensive income) Brackets Annual Taxable Income Tax Rate (%)

1	Up to 36,000 yuan	3%
2	Over 36,000 yuan nor more than 144,000 yuan	10%
3	Over 144,000 yuan nor more than 300,000 yuan	20%
4	Over 300,000 yuan nor more than 420,000 yuan	25%
5	Over 420,000 yuan nor more than 660,000 yuan	30%
6	Over 660,000 yuan nor more than 960,000 yuan	35%
7	Over 960,0000 yuan	45%

  (Notes: 1. For the purposes of this Schedule, “annual taxable income” means the balance of comprehensive income obtained by a resident individual after subtracting expenses of 60,000 yuan, special deductibles, special additional deductibles, and other deductibles determined in accordance with the law from the amount of income in a tax year, in accordance with the provision of Article 6 of this Law.

2. The amount of tax payable on comprehensive income obtained by a nonresident individual shall be calculated on a monthly basis after conversion in accordance with this Schedule.)

XVII. Schedule 2 of Individual Income Tax Rates (applicable to income from the production or operation of an individual industrial and commercial household and the income from the contracted operation or leased operation of an enterprise or public institution) is amended to read: Schedule 2 of Individual Income Tax Rates (applicable to business income) Brackets Amount of Annual Taxable Income Tax Rate (%)

1	Up to 30,000 yuan	5%
2	Over 30,000 yuan nor more than 90,000 yuan	10%
3	Over 90,000 yuan nor more than 300,000 yuan	20%
4	Over 300,000 yuan nor more than 500,000 yuan	30%
5	Over 500,000 yuan	35%

  (Note: For the purposes of this Schedule, “annual taxable income” means the balance after subtracting costs, expenses and losses from the gross income in a tax year in accordance with the provision of Article 6 of this Law.)

The State Council announced on August 3, 2018 the Decision to Cancel Some Administrative Approval Items. 11 such items have been scrapped under the decision. For six items that were established in accordance with laws and regulations, the State Council will submit them to the Standing Committee of the National People's Congress for amendment on the laws and regulations. The canceled items include approvals on business registration for enterprise group, preliminary approval for overseas investment by domestic companies (Excluding financial institutions), registration for business subsidiaries, as well as the establishment, alteration and cancellation of foreign-funded companies' branches.

The People's Bank of China recently announced that starting from August 6, 2018, the forex risk reserve ratio for forward forex sales is adjusted from 0 to 20%. On August 10, the central bank further explained the scope of businesses subject to forex risk reserves. The central bank highlighted some forward forex sales that are exempt from forex risk reserves conducted by overseas institutional investors with investment in domestic securities market: 1) forward forex sales by overseas institutional investors used to hedge against forex risk exposure resulting from approved cross-border securities investment; 2) forward forex sales conducted with overseas central banks.

The fourth draft Amendment to E-commerce Law was submitted on August 27 to the fifth session of the 13th NPC Standing Committee for consideration. Compared with the third draft, the fourth draft has made revisions on provisions concerning the shouldering of liability by e-commerce platform operators, green development of e-commerce, application of laws in e-commerce, and delivery of goods and services. The fourth draft also raised the fines that may be imposed against e-commerce platform operators who restrict transactions of dealers using the platform unreasonably or have the act of infringing the intellectual property of the dealers from "between 50,000 yuan and 200,000 yuan" and "between 20,000 yuan and 500,000 yuan", as specified in the third draft, to "between 50,000 yuan and 500,000 yuan" and "between 500,000 yuan to 2,000,000 yuan".