Note on four special sources of incomes

Annual Bonus

One-off annual bonus refers to bonuses paid by governmental organizations, institutions or enterprises to the employees in accordance with the economic benefit and the employee’s performance of the year.

According to relevant regulations, the one-off annual bonus is taxable. Such individual income tax shall be counted as one month salary and wage income for the purpose of calculation, and be paid by the withholding agent on behalf of the individual. The calculation should be:

1. Divide the one-off annual bonus of the employee by 12 (as in 12 months), and determine the eligible tax rate and quick deduction;

2. Calculate tax payable in line with the eligible tax rate and quick deduction determined in the previous step using the formulas below as appropriate:

a. For those obtaining a monthly salary and wage income higher (or equivalent to) the deduction amount stipulated by the Tax Law, the formula is: Tax payable = annual one-off bonus obtained that month × applicable tax rate –quick deduction;

b. For those obtaining a monthly salary and wage income below the deduction amount stipulated by the Tax Law, the formula is: Tax payable = [annual one-off bonus obtained that month – (deduction amount - salary and wage income of that month) × applicable tax rate – quick deduction].

Contingent income tax

Individual contingent income refers to the occasional income of individuals that is obtained from various occasional opportunities, including winning a lottery, prizes, games and other means (including bonuses, entity and securities).

All contingent income of an individual is taxable. There is no collection threshold, and all such income is taxable at a rate of 20 percent, namely, tax payable = taxable amount * tax rate.

Individual income lower than 10,000 yuan (inclusive) each time for winning a social welfare lottery or sports lottery, is exempted from taxation. If exceeding 10,000 yuan, it is taxable in full at a 20 percent tax rate.

For those winning over 800 yuan from one prize-awarded invoice, it is taxable at full amount at a 20 percent tax rate.

If an enterprise gives gifts to an individual, that income shall be withheld and paid by the enterprise giving gifts in line with regulations if any of the following conditions is met: 1) when an enterprise gives gifts randomly to individuals outside of the enterprise for the purpose of business promotion and advertisement, individual income tax is calculated on the full amount multiplied by 20 percent tax rate; 2) when an enterprise gives gifts to individuals outside of the enterprise at annual meeting, seminar, celebration and other events, individual income tax is calculated on the full amount multiplied by 20 percent tax rate; 3) when an enterprise awards customers exceeding certain levels of shopping quotas with extra lucky draws, the full amount of the awarded income to an individual is taxable at 20 percent.