The Ministry of Finance (MOF) revealed that from now on for all gifts offered by enterprises to individuals, the individual receiving the gift must pay individual income tax, which is to be withheld and paid by the enterprise on behalf of the individual.
According to the circular jointly issued by MOF and the State Administration of Taxation (SAT), for gifts offered by enterprises to individuals outside of the enterprise during business promotion or advertising campaigns, the enterprise should pay individual income tax for the full amount of the gift received by the individual at a rate of 20% under the “other incomes” item.
For gifts offered by enterprises to individuals outside of the enterprise at annual meetings, panel discussions, celebratory events and other occasions, the enterprise should pay individual income tax for the full amount of the gift received by the individual at a rate of 20% under the “other incomes” item.
For lucky draws offered by enterprises to customers whose accumulated spending has reached a certain amount, the enterprise should pay individual income tax for the full amount of the prize won by the individual at a rate of 20% under the “occasional income” item.
If the gift offered by the enterprise is a product produced or service provided by the enterprise itself, the amount of the individual taxable income is to be determined by the market price of the product or service. If the gift is a product or service purchased from outside, the amount of the individual taxable income is to be determined by the actual purchase price of the product or service.
However, the circular also points out that if the gift offered by the enterprise to the individual in the process of selling a commodity (product) or providing a service falls under any one of the following conditions, then no individual income tax will be levied: if the enterprise sells the commodity (product) or provides the service to the individual by means of price discount or sales allowance; if the enterprise offers the gift to the individual in the course of selling the commodity (product) or providing the service to the individual, e.g. telecommunications companies offering call charge or connection charge waiver to individuals buying mobile phones, or offering free mobile phones for call service subscription; if the gift offered by the enterprise is redeemed by the individual whose accumulated spending has reached a certain amount and earned certain points.
