REPLY OF THE MINISTRY OF FINANCE AND STATE ADMINISTRATION OF TAXATION ON RELEVANT ISSUES OF THE INDIVIDUAL INCOME TAX

Ministry of Finance, State Administration of Taxation

Reply of the Ministry of Finance and State Administration of Taxation on Relevant Issues of the Individual Income Tax

Cai Shui [2005] No. 94

To the department of public finance and the local taxation bureau of Jiangsu Province:

Your Request for Instructions on Relevant Issues of the Individual Income Tax (Su Di Shui Fa [2005] No. 50) has been received. Upon
the deliberation, the reply shall be as follows:

1.

Issue concerning how to deal with the individual income tax and enterprise income tax after an entity withdraws the supplementary
old-age insurance for individual. When the commercial supplementary old-age insurance is purchased by an enterprise for its employees,
it shall be subject to the individual income tax item of the “income from wages and salaries” and pay the individual income tax
pursuant to the tax law when handle the formalities of insurance; if it is withdrawn for any reason and the individuals fail to obtain
the actual income, the individual income tax which has been paid shall be refunded.

2.

Issue concerning the individual income tax on an individual’s income gained by providing guaranty. Where an individual obtains payment
by providing an enterprise or another person with a guaranty, he shall pay individual income tax according to the item – “other income”
as specified in the Individual Income Tax Law. The tax payable shall be levied through withholding by the entity or individual that
makes the payment.

Ministry of Finance

State Administration of Taxation

June 2, 2005