Income tax reform offers a sense of gain

The Standing Committee of the National People's Congress, China's top legislature, is soliciting public opinion on the draft amendment to the Individual Income Tax Law through July 28. The draft amendment responds to not only people's appeal to raise the threshold of individual income tax, but also focuses on gradually building a personal income tax system that is both comprehensive and able to accommodate diversity, which the government has been emphasizing for years.

Several elements stand out in the draft amendment. First, it uses international experience to differentiate resident individuals from non-resident individuals. The draft says a resident individual is one who has lived in China for more than 183 days, compared with the one-year period previously, and thus expands the jurisdiction of the tax authority.

Second, it imposes a unified tax rate on incomes from various sources, including salary, remuneration and royalty, taxing an individual's annual income instead of monthly income. This means the reform is aimed at building a new personal income tax system that takes into account both separate income sources and the total income of an individual.