China's H1 2026 Individual Income Tax Hits RMB 898.2 Billion, Up 13.1%
In the first half of 2026, China's individual income tax revenue reached RMB 898.2 billion, a year-on-year increase of 13.1%, outpacing the 5.3% growth in total tax revenue. The tax became the country's third-largest revenue source, after value-added tax and corporate income tax. Growth was driven by capital gains, better-performing industries, and enhanced compliance among high earners. The top 1% of taxpayers contributed over half of the individual income tax. The system taxes high incomes while relieving low earners, with over 70% of filers owing no tax after deductions.
In the first half of 2026, national individual income tax revenue reached RMB 898.2 billion, a year-on-year increase of 13.1%, while total tax revenue grew by 5.3% over the same period. Individual income tax thus became the country's third-largest tax category, trailing only value-added tax and corporate income tax. It plays a significant role in raising fiscal revenue and adjusting income distribution.
The Individual Income Tax Law, revised in 2018, introduced a combined comprehensive and classified taxation system, raised the basic deduction threshold, and added special additional deductions, marking a major upgrade of the system. Currently, the basic deduction is RMB 60,000 per person per year. Taxpayers may also claim special deductions for social insurance premiums and housing provident fund, as well as special additional deductions for children's education and support for elderly parents.
The growth in individual income tax is mainly attributed to capital-related income, with notable increases in tax from equity transfers and dividends. Some industries have performed well, boosting the incomes of their employees. Tax authorities have also strengthened guidance for high-income individuals. Taxpayers in the top 1% of annual income account for more than half of the total individual income tax paid.
The individual income tax system adjusts through both raising taxes on high earners and reducing burdens on low earners. Data show that individuals with annual income below RMB 120,000 are largely exempt after various deductions. Over 70% of filers owe no tax after annual reconciliation. Among those who do owe tax, more than 60% are subject to the 3% tax rate. These design features lighten the tax burden on middle- and low-income groups.
The 15th Five-Year Plan outline calls for stronger income distribution adjustment, explicitly enhancing the redistributive roles of taxation, social security, and transfer payments. Recently, rules for individual income tax on offshore trusts were clarified. Future reform directions include gradually expanding the scope of comprehensive taxation, improving tax policies for business, capital, and property income, making full use of special additional deductions, and refining the tax adjustment mechanism for capital gains.