China Amended the Personal Income Tax Law, the Tax Threshold Raised to 3500 Yuan

The twenty-first meeting of the Eleventh National People's Congress voted to amend the Personal Income Tax Law. According to the modification, monthly wage and salary income would be the base taxable income after subtracting 3500 Chinese yuan. Wage and salary income now apply to a new progressive tax rate, the new progressive rates start from 3% to 45%. This change of tax law will come into force on September 1.

The twenty-first meeting of the Eleventh National People's Congress decided to amend the Personal Income Tax Law as follows:

The first paragraph of the third article was amended to: "Wage and salary income, apply to progressive tax rates, the progressive rates start from 3% to 45%."

The first paragraph of the sixth article was amended to: "Monthly wage and salary income would be the base taxable income after subtracting 3500 Chinese yuan.

This is the third time the tax threshold raises after the implementation of Personal Income Tax Law in 1994. The tax threshold raised from 800 yuan to 1600 yuan in 2006 and raised from 1600 yuan to 2000 yuan in 2008. The amount of tax reduction is the biggest in the history.

In the initial review of the meeting in April, personal income tax threshold was amended from 2000 yuan to 3000 yuan and the existing income tax rates were amended from 9 cascade levels to 7 cascade levels. The NPC Standing Committee reviewed the tax law amendment draft and changed the first level rate from 5% to 3% in June 27.

As a result of this change, the taxpayers' count reduced from 84 million to 24 million, that's mean about 60 million taxpayers don't need to pay personal tax any more, only 24 million taxpayers remain. This could substantially reduce the burden on low-income taxpayers.On the other hand, high-income people will pay more taxes due to the cascading tax rate level, so the total amount of personal income tax will not reduce too much.

This is a good news to all the employers, their cost on the personal income tax will be reduced greatly, because the count of employees who need to pay personal income tax has reduced. The Enterprises will have more money to put into production and development.

Further more, the tax rate of small business(annual income less than 60,000 yuan) reduced 40% in average, in a maximum of 57%, help the small business to reduce costs, improve the business environment and weather the storm.

Reported by Bean Taylor from iFreeTouch.com at 06/30/2011.