Cai Shui [2007] No. 102 Finance Department of Jiangsu Province and local tax bureaus: We have received from local tax bureaus of Jiangsu province the Request on Imposing Individual Income Tax upon Confidentiality Fee to Shareholders in Foreign-funded Enterprises' Purchase of Asset from Domestic Enterprises and Payment (Su Di Shui Fa [2007] No.42 ), which requires clarifying how to impose income tax upon non-competition compensation paid by foreign-funded enterprises to domestic enterprises in the process of their purchase of the asset from domestic enterprises. After research, a reply to the policy about imposition of individual income tax upon non-competition compensation paid by enterprises to individuals is given as follows: Non-competition compensation means the amount paid in the prescribed period by the asset purchasing enterprises to the natural person shareholders of asset selling enterprises in the process of asset purchase dealing with by concluding confidential and non-competition agreement that the natural person shareholder of asset selling enterprises shall, within a period of time after the completion of trade, promise that it may not be engaged in the relevant business of market competition and shall be engaged in the confidential obligation of the relevant technical document. In accordance with the relevant prescription in Section (11) under Article 2 of the Individual Income Tax Law of the People's Republic of China, viewing that the non-competition compensation by the asset purchase enterprises to individuals falls under one-and-for-all income because of contingent factor, the income gained by the natural person shareholder of the asset selling enterprise shall, in accordance with the "contingent income" in accordance with Section (10) under Article 2, calculate such income tax to be paid as shall be deducted and paid by the enterprise purchasing enterprises to the natural person shareholder of asset selling enterprise when paying non-competition compensation. Please abide by and implement it.