State Administration of Taxation, Circular on Earnestly Strengthening the Administration of the Levy and Collection of Individual Income Tax on High-income Earners

(ii) to strengthen the administration of equity obtained from external investment by individuals; and focus on the regulation of activities involving tax that are conducted by listed companies prior to listing such as share capital increase, transfer of equity and investment by strategic investors; and

(iii) to strengthen the administration of levy and collection of income derived from the assignment and auction of housing (Article 2(1)).

(2) Income derived from interests, dividends and extra dividends:

(i) to strengthen the administration of tax withholding pertaining to the distribution of dividends and extra dividends by enterprises, and focus on tax levy and collection pertaining to the conversion of retained earnings, surplus reserve and appraised asset appreciation to registered capital and share capital; and

(ii) to implement key tracking administration and formulate the relevant tax levy and collection measures for individual investors' income derived from dividends and extra dividends where the enterprise consecutively records a profit and does not distribute dividends or extra dividends, or is subject to enterprise income tax by assessment (Article 2(2)).

(3) Income derived from production and other business operations: to focus on strengthening tax levy and collection according to the checking of accounts pertaining to income derived from the production and other business operations of relatively large wholly individually-owned and partnership enterprises, and family proprietors (Article 2(3)).

(4) Individuals whose main source of income are not from service provision: to pay close attention to high-income groups who hold a large amount of company equity, receive a large amount of earnings from investment, and engage in investment in real property and mineral resources, private equity and investment trusts; and implement key administration on tax sources (Article 3(1)).

(5) Income derived from wages and salaries from high-income industries: to focus on all types of income derived from the wages and salaries of middle and senior management personnel of enterprises in high-income industries, especially incentive income such as all types of bonuses, allowances, share options and restricted stocks (Article 3(2)).

(6) Income of high-income foreign nationals:

(i) to further establish and enrich the management files of foreign nationals; keep abreast of the salary standards in different countries, industries and job positions; and strengthen the administration of income derived from sources in China and paid by overseas institutions, and income derived from sources outside China of individuals not domiciled in China, but resident for more than five years; and

(ii) to strengthen the levy and collection of income obtained from non-independent service provision provided by foreign nationals; properly regulate the remuneration of foreign nationals that are borne by permanent establishments or fixed bases; and safeguard against the abuse of tax agreements (Article 3(5)).

Related legislation: Circular on Further Strengthening the Administration of the Levy and Collection of Individual Income Tax on High-income Earners, 2010; Proposal on the Formulation of the 12th Five-year Plan for National Economic and Social Development, 2010 and PRC Outline of the 12th Five-year Plan for National Economic and Social Development, 2011