Article 3 Individual income tax rates:

(1) For income from wages and salaries in excess of the specified amounts, the progressive rates ranging from 5 percent to 45 percent shall apply (see the appended schedule of tax rates).

(2) For income of self-employed industrial and commercial households from production or business operation and income of enterprises or institutions from contracted or leased operation that are in excess of the specified amounts, the progressive rates ranging from 5 percent to 35 percent shall apply (see the appended schedule of tax rates).

(3) For income from author's remuneration, a flat rate, which is 20 percent, shall apply, and the amount of tax payable shall, however, be reduced by 30 percent.

(4) For income from remuneration for personal services, a flat rate, which is 20 percent, shall apply. Where income gained at one time from remuneration for personal services is extremely high, an additive tax may be levied. The specific measures in this regard shall be prescribed by the State Council.

(5) For income from royalties, interest, dividends, bonuses, lease of property or transfer of property, incidental income or income from other sources, a flat rate, which is 20 percent, shall apply.

Article 4 The following categories of individual income shall be exempted from individual income tax:

(1) awards for achievements in such fields as science, education, technology, culture, public health, sports and environmental protection granted by people's governments at the provincial level, ministries and commissions under the State Council, units of the Chinese People's Liberation Army at or above the corps level, or by foreign or international organizations;

(2) interest on national debts and financial debentures issued by the State;

(3) subsidies and allowances given according to the uniform regulations of the State;

(4) welfare benefits, pensions for the family of the deceased and relief payments;

(5) insurance indemnities;

(6) military severance pay and demobilization pay for army men;

(7) settlement pay, severance pay, retirement pay, as well as full-pay retirement pension for veteran cadres and their living allowances, received by cadres, staff and workers according to the uniform regulations of the State;

(8) income, exempted from tax according to the provisions of the relevant laws of China, of diplomatic representatives and consular officers and other personnel of foreign embassies and consulates in China;

(9) income exempted from tax as stipulated in the international conventions to which the Chinese Government has acceded or in agreements it has signed; and

(10) income exempted from tax with the approval of the department of finance under the State Council.

Article 5 In one of the following circumstances, individual income tax may be reduced upon approval:

(1) income of the disabled, the aged without families, or family members of martyrs;

(2) suffering great losses from serious natural disasters; or

(3) other cases where tax is reduced upon approval by the department of finance under the State Council.

Article 6 The amount of taxable income shall be computed as follows:

(1) For income from wages and salaries, the amount of taxable income shall be the part remaining after deduction of 2,000 yuan for expenses from a monthly income.;

(2) For income from production or business operation gained by self-employed industrial and commercial households, the amount of taxable income shall be the part remaining after deduction of the costs, expenses and losses from the gross income in a tax year;

(3) For income from contracted or leased operation of enterprises or institutions, the amount of taxable income shall be the part remaining after deduction of the necessary expenses from the gross income in a tax year;

(4) For income from remuneration for personal services, author's remuneration, royalties and lease of property, the amount of taxable income shall be the part remaining after deduction of 800 yuan for expenses from the amount received in a single payment not exceeding 4,000 yuan; or after deduction of 20 percent from the amount for a single payment of 4,000 yuan or more;

(5) For income from the transfer of property, the amount of taxable income shall be the part remaining after deduction of the original value of the property and the reasonable expenses from the income gained from such transfer; and

(6) For interest, dividends, bonuses, incidental income and income from other sources, the amount of taxable income shall be the full amount received in each payment.

The part of individual income donated to educational and other public welfare undertakings shall be deducted from the amount of taxable income in accordance with the relevant regulations of the State Council.

For taxpayers who have no domiciles in China but obtain wages or salaries within China, or who have domiciles in China but obtain wages or salaries outside China, an additional deduction of expenses may be determined on the basis of the average income level, living standard and the changes in exchange rates. The applicable scope and standard of the additional deduction of expenses shall be prescribed by the State Council.