The Standing Committee of China’s National People’s Congress (NPC) has agreed to raise the personal income tax threshold. With effect from September 1, 2011 the current personal income tax monthly threshold will be increased to RMB 3500 (USD540), from the current level of RMB2,000. The lowest rate of personal income tax has been reduced from 5% to 3%.
The Committee agreed to raise the personal income tax threshold by more than previously proposed by the government, i.e., raising the threshold to only RMB 3000. The NPC increased it to RMB5,000 following the suggestions received in a public consultation. The NPC believed that the approved increase was “necessary and timely” and it would reduce the tax burden on people with low incomes and would also help to control the growing wealth gap in the country.
