Measures for the Calculation of Individual Income Tax on Individual Businesses
Measures for the Calculation of Individual Income Tax on Individual Businesses
Measures for the Calculation of Individual Income Tax on Individual Businesses
Order of the State Administration of Taxation No.35
December 27, 2014
The Measures for the Calculation of Individual Income Tax on Individual Businesses (hereinafter referred to as the "Measures") adopted at the fourth session of 2014 annual executive meeting of the State Administration of Taxation on December 19, 2014 are hereby announced and shall take effect as of January 1, 2015.
Wang Jun Minister of State Administration of Taxation
Measures for the Calculation of Individual Income Tax on Individual Businesses
Chapter I General Provisions
Article 1 In order to regulate and strengthen the administration over the tax collection of the individual income tax on the individual businesses, the Measures are formulated in accordance with the provisions of the individual income tax law and other relevant tax laws, regulations and policies.
Article 2 Any individual business subject to taxation based on account examinations shall calculate, declare and pay the individual income tax in accordance with the provisions of the Measures.
Article 3 The individual businesses in the Measures include:
1. individual industrial and commercial entities who obtain individual business license according to the law and are engaged in the production and operation;
2. individuals engaged in education, medical care, counseling and other paid services activities upon the approval of the relevant government departments; and
3. individuals engaged in other forms of individual production and operation.
Article 4 The individual business owner shall be the individual income taxpayer.
Article 5 The taxable income of an individual business shall be calculated on an accrual basis. The incomes and expenses in the current period, whether collected and paid or not, shall be deemed as the incomes and expenses in the current period; the incomes and expenses not attributable to the current period, though collected and paid in the current period, shall not be taken as the incomes and expenses in the current period, unless otherwise specified by the Measures, the Ministry of Finance and the State Administration of Taxation.
Article 6 Where the accounting method of an individual business is inconsistent with that specified in the Measures and the relevant provisions of the Ministry of Finance and the State Administration of Taxation when the taxable incomes are calculated, the Measures and the relevant provisions of the Ministry of Finance and the State Administration of Taxation shall prevail.
Chapter II Basic Provisions on the Tax Assessment
Article 7 For the proceedings from production and operation of individual businesses, the taxable incomes shall be the balance of total incomes in each tax year deducting the costs, expenses, taxes, losses, other expenditures and losses of previous years allowed to be made up.
Article 8 For the purpose of the Measures, the term "total income of an individual business" refers to all income in monetary or non-monetary forms, obtained by an individual business from its production and operating activities and activities related to its production and operation (hereinafter referred to as the "production and operation"), including income from the sales of goods, labor service income, income deriving from the transfer of property, interest income, rent income, donation income and other incomes.
The other incomes referred to in the preceding paragraph include excessive asset incomes of the individual business, wrappage deposits not refunded that are overdue for more than one year, payables cannot be repaid, receivables recovered after being treated as bad debt loss, incomes from debt restructuring, incomes from subsidies, incomes from liquidated damages, exchange gains and others.
Article 9 The term "costs" as used herein refers to selling costs, costs of goods sold, business expenses as well as other expenses incurred by the individual businesses during the production and operation.
Article 10 The term "expenses" as used herein refers to all sales, management and financial expenses incurred by the individual businesses in the production and operating activities, with the exception of the relevant costs that have been already included in the costs.
Article 11 The term "taxes" as used herein refers to all taxes and additional taxes incurred by the individual businesses in the production and operation activities, except the individual income taxes and value-added taxes allowed to be deducted.
Article 12 For the purpose of the Measures, the term "losses" refers to the inventory losses, damages and abandonment losses of fixed assets and inventories, losses of transferred properties, losses of bad debts, losses caused by force majeure factors such as natural disasters and other losses incurred by the individual businesses in the production and operation activities.
For the deduction of the balance of the losses incurred by the individual businesses net of the compensations by the liable persons and insurance indemnities, the relevant provisions of the Ministry of Finance and the State Administration of Taxation on pre-tax deduction of corporate asset losses shall apply mutatis mutandis.
When the assets treated as losses by the individual businesses are recovered in whole or in part in subsequent tax years, such assets shall be included into the incomes in the current period.
Article 13 The term "other expenditures" refers to reasonable expenditures related to the production and operation incurred by the individual businesses in the production and operation activities, except the costs, expenses, taxes and losses.
Article 14 The expenditures incurred by the individual businesses shall be classified into revenue expenditures and capital expenditures.
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