Circular of the Ministry of Finance and the State Taxation Administration on Issues Concerning the Exemption from Individual Income Tax on Lump-sum Compensatory Income Obtained by Individual Due to the Dissolution of Labor Relation between the Individual and Employer

Circular of the Ministry of Finance and the State Taxation Administration on Issues Concerning the Exemption from Individual Income Tax on Lump-sum Compensatory Income Obtained by Individual Due to the Dissolution of Labor Relation between the Individual and Employer

Cai Shui [2001] No.157

September 10, 2001

Finance departments (bureaus) and local taxation bureaus of all provinces, autonomous regions, municipalities directly under the Central Government, cities specifically designated in the State plan and the Finance Bureau of Xinjiang Production and Construction Corps,

With the primary aim of further supporting enterprises, public institutions, state organs, social groups, and other employers in the promotion of the reform of the labor and personnel system, properly placing the relevant personnel and maintaining the social stability, issues concerning the exemption from individual income tax on lump-sum compensatory income obtained by Individual due to the dissolution of labor relation between the individual and employer are hereby notified as follows:

Article 1 Lump-sum compensatory income obtained by individuals from the dissolution of labor relations with their employers (including the economic compensation given by the employers, living subsidies, and other subsidies), the portion of their income within 3 times the amount of the average wages for local employees for the first half year shall be exempted from the individual income tax.
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