Circular of the State Administration of Taxation on Adjusting the Method of Calculating and Imposing Individual Income Tax on One-Time Annual Bonuses and other Benefits Obtained by Individuals

Circular of the State Administration of Taxation on Adjusting the Method of Calculating and Imposing Individual Income Tax on One-Time Annual Bonuses and other Benefits Obtained by Individuals

Guo Shui Fa [2005] No. 9

January 26, 2005

The local taxation bureaus of all provinces, autonomous regions, municipalities directly under the Central Government, and municipalities directly under the State planning; and all entities subordinate to the State Taxation Administration,

In order to reasonably resolve the problem of imposing taxes on individuals who obtain one-time annual bonuses, we hereby notify on adjusting relevant methods for imposing individual income taxes as follows:

Article 1 One-time annual bonuses shall mean the one-time bonuses distributed by administrative organs, enterprises, public institutions and other withholding agents to employees on the basis of the economic benefits of the whole year and the comprehensive assessments on the employees' work performance during the whole year.
The above-mentioned one-time bonuses also include year-end pay rises, as well as annual salaries and performance-related wages distributed upon the assessment of entities that apply the annual salary system or performance-related wages.

Article 2 The one-time annual bonuses obtained by a taxpayer shall be treated as a separate one-month pay when calculating the tax payable.
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