CHINA has completed a reform plan on individual income tax and it will be submitted to the national legislature for review this year, Finance Minister Lou Jiwei said yesterday.

    The plan has been presented to the State Council and the amendment to the current individual income tax law will be submitted to the national legislature this year, Lou said at a press conference on the sidelines of the annual session of the legislature.

    The amendment is not just about thresholds, but considers overall income and spending, such as housing mortgage, expenditure on education, schooling and elderly care, Lou said, without giving more details.

    The implementation of the law is complicated and will be promoted step by step, said Lou.

    The personal income and property information system should also be improved and relevant laws need to be amended for the individual income tax reform, he added.

    In 2011, China’s top legislature adopted an amendment to the individual income tax law, raising the monthly tax exemption threshold from 2,000 yuan (US$307) to 3,500 yuan with an aim to reduce the tax burden on people with low incomes, as well as help to adjust the distribution of income.

    The version of individual income tax law before 2011 featured a nine-bracket progressive taxing mechanism. Taxes are calculated after subtracting the exemption threshold, with each level carrying different tax rates. The lowest bracket has a 5-percent tax rate for people who earn monthly salaries between 2,000 and 2,500 yuan.

    The amended law reduces the mechanism to a less-segmented seven-bracket system, eliminating brackets corresponding to tax rates of 15 and 40 percent. It also reduces the minimum tax rate from 5 percent to 3 percent for people whose monthly incomes are between 3,500 and 4,500 yuan.

    For foreign individuals and residents of Hong Kong, Taiwan, and Macao working in China, the standard monthly deduction is 4,800 yuan.(SD-Xinhua)

    (Read more on P4: ‘More tax, financial reforms needed’)