2 (a) Mr C, a Chinese national, had the following income for the month of January 2008:
1. Monthly employment income of RMB 10,000, a bonus for the year 2007 of RMB 10,000 and free holiday
travel for a trip to Hong Kong with a market value of RMB 3,000 as a reward for his outstanding
performance.
2. A net gain of RMB 20,000 from trading in the A-shares market.
3. Gross interest income of RMB 1,000 from a bank deposit.
4. Gross interest income of RMB 2,000 from a national debenture and a net gain of RMB 20,000 from the
disposal of the national debenture.
5. RMB 20,000 received as fire insurance compensation, which was less than the original cost of the asset
destroyed by the fire.
Required:
Briefly explain and calculate the individual income tax (IIT) payable by Mr C for the month of January 2008,
clearly identifying any amounts which are tax exempt. (9 marks)
(b) Briefly explain the individual income tax (IIT) treatment of each of the following transactions and calculate
the tax payable (if any) by Mr D, Mr E and Mr F:
(i) Mr D is one of the investors of a limited company, Company P. During the year, Company P bought a
car for RMB 200,000 for Mr D’s personal use. Mr D is the registered owner of the car. (2 marks)
(ii) Mr E is one of the investors of a limited company, Company Q. During the year Company Q lent
RMB 200,000 to Mr E so he could buy a car for his personal use. (2 marks)
(iii) Mr F is the sole owner of a private enterprise R. During the year R bought a car for RMB 200,000 for
Mr F’s personal use. Mr F is the registered owner of the car. (2 marks)
(c) Briefly explain the requirements for the reporting and payment of tax due in the case of the individual income
tax (IIT) on employment income. (5 marks)
(20 marks) 2 (a) Mr C – Individual income tax (IIT) for the month of January 2008
(1) The IIT for monthly employment income = (10,000 + 3,000 – 1,600) x 20% – 375 = RMB 1,905. 2·0
The IIT for the yearly bonus is calculated as follows:
Divide the bonus by 12 10,000/12 = 833·33 to find the applicable tax rate of 10% and the
fast deduction factor of RMB 25
Apply to the bonus amount: 10,000 * 10% – 25= RMB 975. 2·0
(2) The gain from trading in listed shares is exempt. 1·0
(3) The bank deposit interest is subject to tax at 5%: 1,000 x 5% = RMB 50 1·0
(4) The interest income from the national debenture is exempt. 1·0
The net gain on the national debenture is taxable at 20%: 20,000 x 20% = RMB 4,000. 1·0
(5) The insurance compensation is exempt. 1·0
––––
9·0
––––
(b) (i) The benefit to the shareholder Mr D is deemed to be a profits distribution. It is taxed at 20%: 200,000
x 20% = RMB 40,000. 2·0
––––
(ii) The loan to the shareholder Mr E is deemed to be a profits distribution. It is taxed at 20%: 200,000
x 20% = RMB 40,000. 2·0
––––
(iii) The benefit to the sole owner Mr F is deemed to be income received by an entrepreneur from a
private enterprise. It is taxed under the schedule with the fast deduction factor: 200,000 x 35% –
6,750 = RMB 63,250 2·0
––––
(c) Individual income tax (IIT) is reported and paid on a withholding basis through withholding agents. In the 2·0
case of employment income the earner of the wages and salaries is the taxpayer and the paying unit or
individual will be the withholding agent.
The tax withheld on a monthly basis must be paid to the State Treasury within the first seven days of the
following month together with the submitted tax returns. 1·0
(Note: in some cases, local tax bureaus may have different tax filing and payment dates).
Where annual income is over RMB 120,000, the taxpayer must file an annual return within 3 months
after the end of the taxable year. Where there is earned income from a source outside China, the taxpayer 2·0
must file an annual return within 30 days after the end of the taxable year.
––––
5·0
––––
20
–––– | 
发表于 2008-10-11 14:12
| 