The State Administration of Taxation (SAT) recently released the Circular on Clarifying Several Policy Implementation Issues of Individual Income Tax. One major issue discussed was the taxation of divorce settlements.
(OPENPRESS) October 17, 2009 -- The State Administration of Taxation (SAT) recently released the Circular on Clarifying Several Policy Implementation Issues of Individual Income Tax. One major issue discussed was the taxation of divorce settlements.
Under China's current tax law, where an individual transfers property or receives a gift of property, the donee shall pay 20% of the income from the gift, and only relevant taxes and fees may be deducted. The original value of the property may not be deducted. China's tax authorities make it clear in the Circular that a division of house property rights by means of property division pursuant to a divorce are defined as the couple's disposal of their property of joint tenancy, and individuals who transfer their property rights in these circumstances shall not be subject to individual income tax. For income derived from the transfer of houses obtained through a divorce property division, the individuals are subject to individual income tax for the remaining part at the prescribed tax rate after deducting the original value and reasonable expenses. However, for property that has been resided in for personal family use for more than over five years, individuals may apply for an exemption from individual income tax.
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