Nov. 30 – China’s State Administration of Taxation has released a circular clarifying issues on individual income tax levy for individuals subleasing property.

The circular highlights the following issues on individual income tax for rental incomes from individuals subleasing property as follows:

1. The rental income from an individual subleasing leased property is classified as taxable income for individual income tax, and the individual income tax should be calculated according to the item “income from leasing property.”

2. The rent paid to the lessor by the individual who receives income from subleasing property is allowed to be deducted from the subleasing income when calculating individual income tax based on the house-leasing contract and lawful payment vouchers.

3. The sequence of pre-tax deductions concerning individual income from property leases in the Reply of SAT on Several Business Issues Regarding Individual Income Tax (Guoshuifa [2002] Document No. 146) are adjusted as following:

(1). The taxes paid during the process of leasing property;

(2). The rent paid to the lessor;

(3). The actual expenditure of repair costs for leased properties borne by taxpayers;

(4). The standard cost deductions stipulated in tax laws.

For more information on tax and accounting systems in China, email Sabrina Zhang, the national tax partner for Dezan Shira & Associates, at tax@dezshira.com.

Correction, December 7, 2009
The circular mentioned in this article, “Reply of SAT on Several Business Issues Regarding Individual Income Tax (Guoshuifa [2002] Document No. 146),” was originally mislabeled as Guoshuifa [2009] Document NO. 146.