Recently, JD.com founder Liu Qiangdong distributed red envelopes to elderly people in his hometown. Some lawyers believe that after receiving a red envelope, the recipient should promptly declare and pay personal income tax to the local tax authorities. As soon as this statement was made, it quickly topped the Weibo hot search. I have received verification requests from multiple friends and clients. The author believes that the donation is not within the scope of personal income tax collection. Similarly, if readers receive red envelopes distributed by family and friends during the Chinese New Year, they do not need to pay taxes. The reasons are as follows.

1、 The act of accepting New Year's red envelopes is not an "accidental gain"

Article 2 of the Personal Income Tax Law stipulates that natural persons who obtain nine types of income, including wage and salary income, labor remuneration income, and accidental income, shall pay personal income tax. Therefore, some people classify the act of receiving red envelopes as "accidental income" and believe that personal income tax should be paid.

However, according to Article 6 of the Implementation Regulations of the Personal Income Tax Law, "accidental income" refers to income obtained by individuals from winning awards, prizes, lottery winnings, and other accidental sources. "Accidental income in daily tax administration also mostly applies to individual awards, prizes, or lottery winnings. China does not impose personal income tax on the act of "natural persons distributing red envelopes and natural persons accepting red envelopes" as "accidental income".

2、 China has not implemented a 'gift tax'

Someone consulted with me, the act of distributing red envelopes is considered a gift act, and does the recipient have to pay "gift tax"?

Firstly, it must be emphasized that China has not levied a "gift tax". Gift tax is a tax type that accompanies inheritance tax, classified as "property act tax" because it focuses on the quantity or value of property as the taxable object. Gift tax is a supplement to inheritance tax, designed to prevent property owners from evading inheritance tax by gifting their property to others during their lifetime. Currently, there is no inheritance tax or gift tax in China.

Secondly, even if gift tax is levied in the future, it will still tax the "property owner", meaning that the taxpayer is the "property owner" rather than the "recipient".

3、 Individuals who receive New Year's red envelopes distributed by their employed companies should pay personal income tax based on "salary and wage income"

The act of receiving red envelopes by individuals is not exempt from taxation in all circumstances. When the issuing entity is an "enterprise", there is a situation where individual income tax needs to be paid.

According to Article 6, Paragraph 1 of the Implementation Regulations of the Personal Income Tax Law, "Wage and salary income refers to the wages, salaries, bonuses, year-end salary increases, labor dividends, allowances, subsidies, and other income related to employment or employment obtained by individuals due to their employment or employment." As an individual obtains a New Year's red envelope from an employed enterprise based on the existence of a "employment or employment relationship" between the two parties, when an individual obtains a New Year's red envelope issued by a company, they should pay personal income tax according to "wage and salary income".

4、 Individuals who receive red envelopes or gifts distributed by non employed enterprises should pay personal income tax as "accidental income"

According to Article 3 of the Announcement of the Ministry of Finance and the State Administration of Taxation on the Application of Personal Income Tax to Taxable Income Items for Personal Income Tax on Income Obtained by Individuals, "... if an enterprise gives gifts to individuals outside the unit during annual meetings, symposiums, celebrations, or other activities, the personal income tax on the gift income obtained by individuals shall be calculated and paid according to the 'accidental income' item

At the end of the year, readers and friends are invited to attend the annual meetings and celebrations of clients or friend companies. If they receive red envelopes distributed by non employed enterprises or draw gifts on site, they should pay personal income tax as "accidental income", which will be withheld and paid by the enterprise distributing the red envelopes and gifts.

The premise for individuals to pay taxes when receiving red envelopes is to receive red envelopes distributed by the "enterprise". The act of the founder of JD.com distributing red envelopes to fellow villagers with personal property belongs to natural person distribution, and the recipient is not required to pay personal income tax. Similarly, if you receive red envelopes from family and friends during the Chinese New Year, you do not need to pay personal income tax.

I take this opportunity to wish everyone a lot of red envelopes and prosperous luck during the New Year!