China's Individual Income Tax Law was implemented in 1980, and amended in 1993 and 1999.

In 1994, the State Council promulgated the Implementation Regulations of the Individual Income Tax Law.

According to the law and regulations, individual income tax is levied on wages, salaries, and other remunerations including dividends, bonuses, rental income and accidental income.

For taxes on wages and salaries, progressive rates from 5 per cent to 45 per cent are levied on those incomes more than 800 yuan (US$96.62) for Chinese citizens and 4,000 yuan (US$483.09) for foreigners. That means Chinese citizens and foreigners are allowed tax-free incomes of 800 yuan (US$96.62) and 4,000 yuan (US$483.09).

Foreigners who have lived in China for less than a year should pay individual income tax on their incomes earned in China.

Those who have lived in China for less than 90 days in succession, or 183 days for those whose countries that have signed tax treaties with China, shall be exempted from income tax in China.

However, foreigners who have lived in China for more than one year but less than five years will have to pay individual income tax in China on their income derived from sources within and outside China.

If they have lived in China for more than five years, starting from the sixth year, they will have to pay taxes in China for their entire incomes earned in any country.

People from the Hong Kong and Macau special administrative regions should pay the same individual income taxes as foreigners do in China.

(Business Weekly 12/28/2004 page8)