New law of the People’s Republic of China on Individual Income Tax is released on June 30, 2011 by 21st Session of the Standing Committee of the Eleventh National People’s Congress.
According to new law, for income from wages and salaries, the deduction amount is increased to BMB 3,500 and expands the tax-paying scope of low grade rate and high grade rate through adjusting tax rate structures.
Lee & Lee Associates Comments: The purpose of revising this law is to contribute to reduce the enlarged difference between the rich and poor. For businesses, if low income employees are the most, the employees may feel goods since less tax is paid and net income increases, and accordingly the impact of the new law on operation environment may be low. If high income employees are the most, fluctuation of employees may be increased or other human resource issues may be raised since new law may reduce the net income of employees. The management of the businesses shall evaluate the impacts of the new law to business operation environment and prepare responding measures as early as possible.
Relevant Rule: “Decision of the 21st Session of the Standing Committee of the Eleventh National People’s Congress on Amending the Law of the People’s Republic of China on Individual Income Tax”
