(State Administration of Taxation: 8 March 1994 Coded Guo Shui Fa[1994] No. 045)

(State Administration of Taxation: 8 March 1994 Coded Guo Shui Fa[1994] No. 045) Whole Doc.

To the tax bureaus of various provinces, autonomous regions and municipalities, to the tax bureaus of various cities with independent planning and to various sub-bureaus of the Offshore Oil Tax Administration: In order to properly implement the relevant stipulations of the Individual Income Tax Law and Regulations on Its Implementation, after study, we hereby clarify some questions concerning the links of policies on the original individual income regulatory tax and the income tax of urban and rural individual industrial and commercial units as follows: I. With regard to the back pay given for 1994 due to reform of the wage system conducted in the spirit of the Circular of the State Council on Questions Concerning Reform of the Wage System for Personnel of Organizations and Institutions Coded Guo Fa [1993] No. 79, tax shall be levied in light of different circumstances. the back pay given for various months of the fourth quarter of 1993 shall be merged with the originally issued wages on which individual income regulatory tax is calculated and levied; for wages belonging to 1994, individual income tax shall be levied in accordance with relevant stipulations of the Individual Income Tax Law and Regulations for Its Implementation, individual income tax is temporarily exempt from the differences of the original subsidies and allowances which have not been incorporated into the total amount of wages.

II. For the taxable income earned by an individual after January 1, 1994 but belonging to previous years, tax shall be calculated and levied in accordance with the applicable tax laws and regulations in the period during which the income is earned.

III. With regard to taxable income ferreted out as belonging to years before 1994, the overdue tax shall be levied and dealt with in accordance with the applicable tax laws and regulations of the period to which the taxable income belongs.

IV. With regard to individual industrial and commercial units whose income tax is levied in light of the method of auditing account, a final settlement shall be made in accordance with relevant stipulations of the Provisional Regulations for Income Tax on Urban and Rural Individual Industrial and Commercial Units in regard to their payable income tax for 1993.

V. For the post-tax profits earned by private enterprises in 1993 and the previous years which have not yet been distributed, distribution shall be conducted in accordance with relevant stipulations before the end of a final settlement of the income tax for 1993, and individual income regulatory tax shall be calculated and levied. If distribution is still not conducted, 50 percent of the undistributed profits shall be regarded as money of personal consumption and individual income regulatory tax shall be calculated and levied at a 40 percent tax rate.

VI. For bonds from which individual income regulatory tax is exempt as clearly set in unified state tax policies before December 31, 1993, individual income is exempt from the interest which was paid after January 1, 1994.

The circular is hereby specially issued, please put it into practice.