China, People's Republic of
Personal deductions from comprehensive income for residents
When calculating taxable comprehensive income for residents, IIT law allows the following personal deductions (non-refundable and no carryback/forward provisions).
Standard basic deduction
As of 1 January 2019, the amount of the standard basic deduction is CNY 60,000 per annum (i.e. CNY 5,000 for monthly tax withholding purpose).
Chinese social security contributions made in accordance with the Social Security Law and contributions made to the statutory Housing Fund are deductible for IIT purpose.
Specific additional deductions
Residents deriving comprehensive income, if eligible, can claim the following specific additional deductions when calculating the annual taxable income:
|Deductible item||Deductible amount (CNY)|
|Child education||1,000 per child per month|
|Continued education||400 per month or 3,600 per year depending on the type of qualified continued education|
|Mortgage interest||1,000 per month|
|Rental expense||800, 1,100, or 1,500 per month depending on the location|
|Elderly care||Up to 2,000 per month depending on the status of the taxpayer|
|Major medical expense||Qualified self-paid portion above 15,000 and capped at 80,000 per year for each eligible individual|
|Care expense for children under the age of 3||1,000 per child per month|
Other allowable deductions
There are also certain deductible items specifically provided by various IIT regulations, such as employee contributions to qualified corporate annuities, premiums paid to commercial health insurance eligible for IIT incentives, premiums paid to commercial endowment insurance eligible for IIT deferral treatment, etc.
Personal deductions from employment income for non-residents
When calculating taxable employment income for non-residents, IIT law only allows the standard basic deduction of CNY 5,000 per month.
If an individual makes charitable contributions to qualified domestic non-profit organisations, such contributions are deductible to the extent of 30% of one's taxable income reported. This deduction is applicable to all categories of income.
Remuneration for labour services, author's remuneration, and royalties
A deduction equal to 20% of the gross receipt is allowed when determining the income from labour services, author's remuneration, and royalties. A further deduction of 30% is allowable for author’s remuneration.
The following deductions are provided for rental income:
- If the amount received in a month is not more than CNY 4,000, a deduction of CNY 800 is allowed.
- If the amount received in a month exceeds CNY 4,000, a deduction equal to 20% of the gross receipt is allowed.
There are specific and complex tax rules to address the deductions available for income derived from the operation of privately-owned businesses, sole proprietorship enterprises, and partnerships. Certain deduction caps are similar to those applicable to companies that are subject to corporate income tax.
In addition, for individuals who derive both comprehensive income and business income during the tax year, the standard basic deduction of CNY 60,000, specific deductions, specific additional deductions, and other allowable deductions (i.e. personal deductions applicable to comprehensive income) are allowed to be deducted from either income category provided that no double deduction is claimed.
Income from the transfer of property (capital gain)
For sales of property, the original cost of the property and reasonable expenses incurred are deductible from the sales proceeds to arrive at the taxable income.
Generally, capital losses are not allowed to be set off against other income or carried forward to other years.
Losses from privately-owned business and sole proprietorship enterprise can be carried forward for five years.