Top Earners To Report Income In China

by Mary Swire, Tax-News.com, Hong Kong

10 November 2006

China's tax bureau has announced that high earners, including foreigners, will be required to report their income directly to the tax authorities as the government sends a strong signal that tax avoidance will no longer be tolerated.

According to a statement posted on the website of the State Administration of Taxation, the new requirement will apply to individuals who earn more than 120,000 yuan (US$15,000) per year.

Taxpayers must report salaries, dividends from bank accounts and other investments and gains from property rentals, to authorities within three months after the end of each tax year under the new rules, which will be implemented next year.

Those receiving foreign source income, multiple sources of income or who are not paid directly by an employer will have to declare income immediately upon receipt.

Even individuals whose tax is deducted at source by their employers but who meet the new criteria will have to declare their income under the new system.

The SAT said that the new rules are designed to make it harder for individuals to hide income through various loopholes in the tax laws.

"Many higher-income individuals in the country earn incomes through a variety of channels, and some of these channels are not public; so tax authorities often have no record of the earnings," the statement noted.

The first declarations must be made by March 31, 2007.

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