Notice on Strengthening and Standardizing the Collection of Individual Income Tax on Auction Income Earned by Individuals
Local Tax Bureaus of Provinces, Autonomous Regions, Directly-Administered Municipalities, and Cities Under Separate Planning; State Administration of Taxation of the Ningxia and Tibet Autonomous Regions:
According to feedback from some regions, the current regulations on the collection of individual income tax on income derived from the auction of various assets—including calligraphy and paintings, porcelain, jade artifacts, jewelry, philatelic items, coins, ancient books, antiques, and other such objects—through auction markets lack sufficient detail. To enhance operability, it is necessary to further refine and standardize these regulations. Therefore, in accordance with the provisions of the Individual Income Tax Law of the People’s Republic of China and its Implementing Regulations, as well as the Tax Collection and Administration Law of the People’s Republic of China and its Implementing Rules, we hereby issue the following notice:
I. Individuals who auction their personal property through an auction market shall have their income from such auctions taxed according to the following provisions:
(1) According to the “Notice of the State Administration of Taxation on Issuing the Provisions on Several Issues Concerning the Collection of Individual Income Tax” (Guo Shui Fa [1994] No. 089), income derived by an author from auctioning the original or a copy of his/her literary manuscript shall be calculated as follows: The taxable income shall be the balance remaining after deducting RMB 800 (if the transfer income is RMB 4,000 or less) or 20% (if the transfer income exceeds RMB 4,000) from the amount of transfer income. Such income shall be subject to individual income tax at a rate of 20% under the “Royalty Income” item.
(2) For personal auctions of assets other than manuscripts and photocopies of literary works, the taxable income shall be the balance obtained by subtracting the original cost of the asset and reasonable expenses from the transfer income. Such income shall be subject to individual income tax at a rate of 20% under the “income from transfer of property” item.
II. When levying personal income tax on the proceeds from the auction of personal property, such property shall be... Final auction price The amount of the transfer income is its value.
III. When calculating the taxable income applicable to the “income from transfer of property” item for proceeds from the auction of personal property, taxpayers may, with valid and legal supporting documents (such as official invoices supervised by the tax authorities, relevant overseas transaction documents or customs declaration documents, and proof of tax payment), deduct from their transfer income the corresponding original value of the property, taxes paid during the auction process, and other reasonable expenses incurred.
(1) The original value of the property refers to the price at which the seller personally acquired the auctioned item (subject to legally valid documentation). Specifically:
1. The actual price paid at the time of purchasing the auction item, whether through stores, galleries, or other channels;
2. The actual price paid for the auction item and any related taxes and fees incurred when acquiring it through an auction house;
3. Expenses incurred in acquiring the auction item through a family heirloom collection;
4. The relevant taxes and fees incurred when the recipient acquires the auction item through donation;
5. For property acquired through other means, the original cost shall be determined in accordance with the principles outlined above.
(2) Taxes paid during the auction of property refer to the actual taxes and surcharges paid by the taxpayer when the property is auctioned.
(3) Reasonable expenses refer to the actual expenses paid by the taxpayer in accordance with regulations when auctioning property, including auction fees (commission), appraisal fees, valuation fees, catalog fees, and certificate fees.
4. If a taxpayer cannot provide legal, complete, and accurate documentation of the original cost of the property, or if the original cost cannot be correctly calculated, personal income tax shall be paid at a rate of 3% based on the amount of the transfer income. For auctioned items that have been identified by the cultural relics authorities as cultural relics returned from overseas, personal income tax shall be paid at a rate of 2% based on the amount of the transfer income.
V. If the documentation for the original cost of a taxpayer’s property is filled out improperly, or if a single document for the original cost covers multiple auction items and it is impossible to identify the original cost corresponding to each individual auction item, such documentation shall not be used as the basis for calculating the deduction of the property’s original cost. Instead, it shall be deemed that the taxpayer has failed to provide legal, complete, and accurate documentation for the property’s original cost, and personal income tax shall be calculated and paid according to the collection rates specified above.
6. If a taxpayer can provide legal, complete, and accurate documentation of the original value of the property but cannot provide relevant tax and fee receipts, the taxpayer shall not calculate tax based on the prescribed collection rate. Instead, the taxpayer must deduct the amount indicated on the original value documentation in actual terms and pay individual income tax in accordance with tax laws and regulations.
7. The individual income tax payable on the proceeds from the auction of personal property shall be withheld and paid by the auctioning entity, which shall also file a tax return with the tax authority having jurisdiction over the location of the auctioning entity in accordance with applicable regulations.
8. When the auction entity withholds and remits the personal income tax payable on proceeds from the auction of personal property on behalf of the taxpayer, it shall issue a tax payment certificate to the taxpayer, clearly indicating the name of each auction item, the final auction price, and the amount of tax withheld.
9. The competent tax authority shall strengthen tax administration over income derived from the auction of personal property. During the auction events held by auction houses, the authority shall dispatch staff to the auction site to gain insight into relevant auction details, provide guidance and education on applicable tax policies, review and verify documentation pertaining to original asset values and expense receipts, and urge auction houses to withhold and remit personal income tax in accordance with the law.
10. This notice shall take effect as of May 1. The “Notice of the State Administration of Taxation on Issues Concerning the Collection of Individual Income Tax on Auction Proceeds from Calligraphy and Painting Works, Antiques, and the Like” (Guoshui Fa [1997] No. 154) shall be repealed concurrently.